The tortoise and the hare both have a role to play when it comes to the stock market. Some commentators focus on the seemingly-exciting hares of top growth stocks. But the FTSE 100 index of leading British businesses has more tortoises, those long-established and fairly slow-growing businesses.
Still, for someone who takes a long-term approach to investing, that could still present a significant opportunity to build wealth over time.
Three key elements
That is because such an approach can benefit from a trio of helpful factors. The first is regular contributions. Putting a certain amount of money into an investment vehicle on a consistent basis can add up over time.
The second helpful factor is what is known as compounding. That is when earned money starts to earn more money. For example, someone might use dividends to buy more shares that, in turn, can earn even more dividends – and so on… Capital gains can also help compounding.
A third factor is buying strongly-performing shares. That is an art not a science. But if a portfolio puts in a decent performance each year on average, over the long term that helps returns.
So the FTSE 100 may not be the raciest part of the stock market, but its focus on large and often well-established businesses means that, over the long run, I expect it to perform decently.
For example, over the past couple of decades, the FTSE 100 has produced an average total annual return (including dividends and capital gains, offset by capital losses) of around 6.3%. After putting in £500 a month that compounds at 6.3% annually, the portfolio would be worth over £1m in 50 years.
But 50 years is a long time to wait to aim for a million, I realise. So a bigger contribution could speed things up.
Reducing costs
Over time, fees, costs, commissions and tax could eat up a lot of gains. So it pays to take time to compare different share-dealing platforms, including share dealing accounts, Stocks and Shares ISAs and trading apps.
Buying the index – or individual shares?
The investor could then simply ‘buy the index’, by investing in a tracker fund.
Past performance is not necessarily a guide to what will happen next, but I do think a 6%+ annualised return from the FTSE 100 in decades to come is a realistic expectation.
But an investor could try to do better by putting together a portfolio of some carefully-chosen FTSE 100 shares.
For example, one FTSE 100 share I think investors should consider is Bunzl (LSE: BNZL). The janitorial and food service supplies company has had a tough time with its share price declining 18% over five years.
The City has not warmed to Bunzl’s fairly downbeat outlook for 2026. As a long-term investor, though, I continue to think the company has strong growth opportunities in years to come.
That reflects risks such as inflation eating into profit margins and tariffs pushing up the price of imported goods. These are still risks. But the company has a proven long-term business model, growing through many acquisitions in a market that remains highly fragmented.
Demand for catering items like boxes and serviettes is robust. I think Bunzl’s future remains promising.
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