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What kind of returns is the FTSE 100 offering these days? How quickly can money multiply in value? Let’s say I wanted to know how long a £10,000 stake might take to turn into £20,000 and I chose London’s number-one index for the purpose – how long would it take?
Let’s take a look at three answers for how long the FTSE 100 will take to double in value – including all share price growth and dividends – sorted by the number of years and months each would take.
Three’s up
Possibility 1: 14 years and three months. This is the longest example and a significant underperformance to the average. The duration is calculated using a rate of return (5%) that’s not much above the current average FTSE 100 dividend (3.07%).
That means it’s possible a stock market crash and/or recession takes place over the coming years. Though it should be mentioned this isn’t the floor – money could even be lost over the same period!
Possibility 2: eight years and eight months. This outcome was derived from the average total long-term return. I used the figure derived from trading platform IG which calculated a FTSE 100 average of 8.33% yearly.
In other words, if the Footsie performs at an similar rate compared to average historical performance, the money would be doubled in a shade under nine years.
Possibility 3: five years and 11 months. This scenario assumes that the strength of the last five years is repeated. For context, the FTSE 100 has been growing at a yearly 12.4% since 2021.
This speedy growth would need the companies on the index to enjoy a few great years – perhaps by power of efficiency improvements from artificial intelligence? And higher inflation might boost returns in absolute numbers too.
Of course, there’s an even quicker way than all three of them…
One to consider?
While the better part of a decade is a normal timeframe for a stock market index to double, there will always be component stocks that outperform the average. One Footsie stock of this nature is IAG (LSE: IAG). The airline is up 114% since 2024. That’s doubling the money and then some.
Why? A large part was the concerns in the sector because of the pandemic. Airlines globally were grounding planes because of the coronavirus and share prices tanked too. But anyone seeing the opportunity in the 2022-2024 period would have been quids in today after passenger numbers rebounded.
Could IAG repeat the trick? One reason to think it might is the valuation. The firm trades at a price-to-earnings ratio of just 7.77 – one of the lowest on the FTSE 100. Although rising oil prices is a real risk for a company where much of its input costs are fuel.
Overall, I think the airline could be one of many FTSE 100 stocks worth considering.
Should you invest £5,000 in International Consolidated Airlines Group right now?
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John Fieldsend does not hold any positions in the companies mentioned.
This story originally appeared on Motley Fool
