£20,000 in FTSE All-Share early 2024? Here is what an investor can have now

As initial portfolios go, I think UK investors could do a lot worse than to consider buying a fund that tracks returns. FTSE Shares Everything index. In addition to gaining exposure to our larger companies, a fund like this also provides access to smaller firms with fast growth potential.

Let’s take a closer look at how this index has performed so far this year.

A solid year

As I write (12 December), All-Share is up 7.7%. This is almost the same as FTSE 100 and much less than FTSE 250. Put another way, a £20,000 investment – the biggest annual contribution you can make to a Stocks and Shares ISA – would now cost £21,540.

In fact, the result could be even better than that because I didn’t consider the impact of benefits. Currently, the yield sits at around 3.6%.

For simplicity, let’s assume it was the same price in January. This can amount to an extra £720 on that initial investment of £20,000.

Of course, there is always the temptation to spend that money. But reinvesting it will increase the compounded value over time. Over the years, that can make a huge difference to the wealth of our investors.

But here, we hit a snag.

Buy better

As respectable as a 7.7% return, it pales in comparison to that of the main index in the US market – S&P 500 – managed to gain at the same time.

An investor who puts that £20,000 to work ‘across the pond’ will have seen their money grow by a staggering 28% in 2024 to date. Instead of having £21,540, they will have £25,600 somewhere in the region. Yes!

Given this, how does it make sense to keep a Share All tracker?

What’s going up…

Well, much of the S&P 500’s outperformance has come down to a small group of tech titans like Nvidia, an apple again Tesla.

Elon Musk’s electric car company, in particular, has done very well. Its shares are up more than 70% year to date. This comes despite the company missing analyst expectations for revenue earlier in the year and seeing margins squeezed as competition from Chinese rivals kicks up a gear.

To be fair, a lot of the upside seems to come down to the CEO’s growing friendship with Donald Trump. Investors clearly believe that the latter will do everything in their power to protect and grow the EV maker’s business. Think tax cuts and deregulation of self-driving cars.

The question, however, is whether this performance will continue until 2025. Personally, I’m not sure it’s possible. Tesla’s valuation could rise significantly before more investors can buy. And that’s before we even consider how geopolitical events can affect sentiment.

Buy British?

In such a scenario, we can see more investors looking to spread the risk and gain exposure to parts of the world that look relatively cheap. That includes our UK stock market!

With this in mind, considering a share tracker makes perfect sense to me.

Sure, the fund’s value could stay in line with the S&P 500. But breaking away from the US could give investors a slightly stronger safety net in case 2025 is a bad year for markets (and Tesla shares).