I’m tempted by the considered placing my money right into a FTSE 100 tracker fund, after which simply sitting again and watching.

The FTSE 100 is up 11.7% previously 12 months, so it looks like a good suggestion. But it surely’s been an excellent 12 months, after a couple of fairly unhealthy ones.

Nonetheless, over the previous 20 years (which incorporates the pandemic disaster, and a load of world financial woes), we’ve seen a mean annualised FTSE 100 return of 6.9%.

Over the long run, I reckon that may be fairly good for no effort on my half.

Tracker fund

What would possibly a full 12 months’s Shares and Shares ISA allowance of £20,000 be price right now, if I’d invested it 12 months in the past?

Right here’s what the share price of the iShares Core FTSE 100 UCITS ETF (LSE: ISF) appears to be like like over time:

Scary identify

Don’t be delay by that difficult lengthy identify, because it’s a preferred FTSE 100 tracker. The ‘ETF’ half means it’s an exchange-traded fund. And all which means is we are able to purchase and promote shares on the inventory market each time we like, identical to another inventory. What might be higher?

Anyway, over the previous 12 months, the share price is up 11.1%. It’ll at all times fluctuate a bit from the index, as no tracker may be 100% exact. There are prices to cowl too, although they’re modest. And the vagaries of individuals shopping for and promoting will transfer it round too.

In order that achieve alone would have turned £20,000 to £22,220.

Dividends too

However most FTSE 100 firms additionally pay dividends, and the iShares FTSE 100 is on a forecast 3.8% dividend yield this 12 months.

It might add £762 to the pot.

Now, I have to increase some cautions right here. This ETF invests its money throughout a variety of the highest FTSE 100 shares. That gives security in diversification, which I charge as important for traders.

However even with that, the UK inventory market nonetheless goes by means of unhealthy patches. The typical Shares and Shares ISA misplaced 13.3% within the 2019-20 12 months. And I believe we obtained off very evenly from the 2020 inventory market crash with such a fast rebound. There have been longer ones, and I count on we’ll see extra.

Beginning out

However the longer we put money into the UK inventory market, the higher and fewer unstable our returns are prone to be. A minimum of, that’s what practically 150 years of expertise has proven us. It might change sooner or later, however I believe it’s unlikely.

Going for a FTSE 100 ETF just like the iShares one is, I believe, a fantastic method for a brand new investor to contemplate.

It’s simple, and avoids all of the research and head-scratching wanted to dig out and purchase our personal particular person shares.

Doing all that for me is a part of the enjoyable. However we are able to study and do as a lot, or as little, as we wish in our subsequent ISA 12 months. Or the one after that.