If I could put £30,000 into the FTSE 250 in early 2024, this is what I would have today!

I FTSE 250 is an index of hundreds of companies covering different industries and areas. It has delivered an annual return of 11% since 1994. In comparison, i FTSE 100‘s yielded a very modest 7% since its inception in 1984.

The outperformance of the FTSE 250 reflects its high concentration of average stocks. These are generally faster growth oriented companies with greater potential for profit growth compared to the heavyweight Footsie stocks.

As a result, they have much more room to appreciate the stock price.

However, in recent years the FTSE 250 has struggled to climb. In the last five years it has appreciated by 3.1%. That’s well below the FTSE 100’s 12.7% rise over the same period.

Could the situation be about to change, though?

Going back?

The strong performance of the FTSE 250 so far in 2024 bodes well.

Since January 1, the FTSE 250 has risen 6.5% in value. That’s just a shade below the FTSE’s 6.6% rise.

This means I would have £31,950 in my account if I had invested £30,000 in a tracker like Vanguard FTSE 250 UCITS ETF. That does not include dividend income.

Reasons to be happy

It’s all well and good. But can the index continue its positive trend going forward?

There are obvious challenges, such as the prospect of long-term negative growth in the UK (around 70% of the FTSE 250’s earnings are generated overseas).

But there are reasons for optimism. Inflation is falling and central banks around the world are cutting interest rates. This means that consumers and businesses should have more money to spend going forward.

Years of underperformance mean that many FTSE 250 stocks remain very cheap right now. As the investor freeze melts, this could encourage further gains in the middle ground as bargain hunters jump in.

The highest value of the FTSE 250

Investors can try to get more profit by buying a tracker like the one described above. Tools like this exchange-traded fund (ETF) can be great for helping me reduce risk by spreading my money across an index.

On the other hand, I would never beat the market by buying simple trackers like this. To do this, I need to identify individual stocks to buy.

I believe that investing in certain stocks and ETFs can be a great way to balance risk and reward. Games Workshop (LSE:GAW) is one FTSE 250 share that I bought for my share portfolio.

The company’s share price is up 21.5% year to date. This takes the total returns over the past five years to 164.4% since its return began.

Income here can soften during a recession. But Games Workshop has so far been able to thrive because of its leading position in a niche industry. Yours Warhammer product line is the gold standard in tabletop gaming, and attracts a large (and growing) fanbase around the world.

I think the share will go up, too, as we expand globally and evaluate TV and film deals for their content. Profits here jumped 12% over the previous financial year.