The FTSE 100 has increased 60% in 5 years. Here is why, and a great lesson!

Investors often think of the blue chip Ftse 100 Index of the main actions such as Staid, if not bored.

But in the last five years, the index has increased by 60%.

That is a fairly spicy growth for a business collection, some of which, such as Legal and general – They were in operation before Queen Victoria ascended to the throne.

What is happening?

Mature markets are not always calm

If you return your mind where you were and what you were doing five years ago, then things can be more obvious.

That March, the markets had crashed when the global pandemic strengthened. Therefore, looking at the last five years flatter the long -term performance of FTSE 100 due to an abnormally low baseline.

If we extended the deadline only one more months, until January 2020, growth would have been only 13% so far. That is still a growth, but a long way of less than 60%!

Even so, I think there is a valuable lesson here from which an investor can benefit. Even a mature business index that feels in search of Staid can see that its price is safetyly swings within a fairly small term.

Buy when the market accumulates with doubt

A brave investor is needed to enter the markets when the hordes of people sell.

Sometimes, a shock can be exaggerated. But for some actions, a price shock is highly rational, since the market is evaluating the possible future impact on its business of what has precipitated a sudden recession of the market.

Carry Saga As an example. The price of its action began 2020 with more than £ 7. As the market realized that travel restrictions inspired by the pandemic could be catastrophic for a company that sells cruises to pensioners, the action approached £ 2 in March 2020. Today, although it is even lower.

Therefore, buying in a market shock can be like trying to catch a fall that falls. No matter how low the price of the action (any price of the action), can always go below.

But the moments of frenzy on the market can also throw large bargains.

18%+ performance of a FTSE participation

Today, Ftse 100 Asset Manager M & g (LSE: MNG) has a 9.2%yield. That is very attractive to me, among the highest in the index.

However, a little less than five years ago, the price of M&G shares had collapsed to about 51% of its current level. Not only does that mean that someone who invests now would almost have doubled their money (on paper), but also obtained an annual dividend yield of more than 18%.

For a blue chip ftse company that has a policy of maintaining or raising its dividend by action annually, a performance of 18% is surprising.

Of course, dividends are never guaranteed and we will discover this Wednesday (March 19), when M&G releases its results of 2024, if the dividend has grown even more.

As in 2020, there are risks to the asset manager. In the first half, customers withdrew more funds from the main business than they put. If that continues, you could damage the profits.

Even so, for a business tested with millions of customers, the price of M&G shares five years ago seems like a bargain today!

Yes, that is the benefit of retrospective.

But it also explains why I am doing a list of ftse actions now I would like to take if another market accident sends them to sink!