£20,000 invested in FTSE 100 stocks in a Stocks and Shares ISA 5 years ago is now worth…

Let’s say an investor put £20,000 into a Stocks and Shares ISA on this date (28 August) five years ago. If they had invested the money into a broad-market index fund tracking the FTSE 100, how much cash would they be sitting on now?

‘Quite a lot’ is the answer. Between 2021 and 2026, the Footsie showed strong performance. Its points total started at 7,148 and rose to 10,808, a rise of over 50%. But that’s only half the story, because it doesn’t account for dividend payments over the period. Dividends are no small potatoes here — the FTSE 100 is renowned as (probably) the highest dividend payer of all leading global indexes.

Here are the final numbers. The total return over the period (adding together all gains from share price appreciation and dividends) was 81.32%, which works out to a yearly average of 12.6%. That’s a fair sight higher than the 3% to 4% that the investor might have received from a Cash ISA over the period.

What about that little £20,000 nest egg? It would now be worth £36,264. The average yearly interest was over £3,000.

If the same trajectory were to continue, then that £20,000 starting stake would earn £4,569 over the next year. And because that money is in a Stocks and Shares ISA, not a single penny needs to be sent to HMRC. Lovely stuff.

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Potential

Let’s put the brakes on a second. The above numbers come from something of a hot streak for the FTSE 100. The last half-decade is unlikely to be matched by any index over the long-term. Even the American S&P 500 – historically the best performing – has not achieved above 11% over multiple decades.

What it does show, in my view, is that shrewd investing can be very rewarding. Perhaps that might be looking at the Footsie after a few years of underperformance and seeing the potential. But it can also mean investing in individual stocks. That carries a higher possible reward and with higher risk, too. For example…

One to consider?

Aviva (LSE: AV.) is one of the biggest contributors to the FTSE 100’s outperformance of late. The blue chip’s share price is up 79% over the five-year period, all while offering blockbuster dividends too. The dividend yield over the last 12 months was 5.53%.

Can the insurance giant continue the strong run? I think so. The purple patch was underpinned by the stewardship of CEO Amanda Blanc – high-quality leadership is always something to look out for in a good stock. Higher interest rates look set to boost the yields on bonds and other investments (albeit this is a risk given the Bank of England’s 2% interest rate target). And an ageing population in core markets offers growth opportunities for its insurance products.

There’s no telling ahead of time what £20,000 invested into a Stocks and Shares ISA today will be worth in five years. But if the returns are as good as the last five, then I might expect to see Aviva in the vanguard of strong-performing stocks. I think it’s worth considering.

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John Fieldsend owns shares in Aviva.