FTSE 100 hits all-time high in 2025 – should you invest?

The FTSE 100 hit an all time high this week, and could reach 9,000 points by the end of 2025 according to the investment platform AJ Bell, with a bumper dividend forecast of £83.6bn adding an extra sweetener for investors.

Despite a near-record £56.5bn in share buybacks last year, plus £78.5bn in regular dividends, analysts believe UK equities still look comparatively cheap. In other words, there could be good deals to be had on UK-listed shares.

Read on to find out more about the FTSE 100, where its growth in 2025 is likely to come from, and whether you might consider investing.

Please note: the content contained in this article is for information purposes only and does not constitute financial or investment advice.

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How did the FTSE do in 2024?

The UK’s best-known stock market index – which covers the 100 firms with the biggest market capitalisation on the London Stock Exchange – hit a record high of over 8,400 points this week, capping a good 12 months.

Strong dividends and share buybacks contributed to a strong 2024 overall for the FTSE – between January and December the index grew by a healthy 6.3%.

Analysts expect aggregate pre-tax profit for 2024 to top £224bn, just a fraction below the all-time record set in 2022.

AJ Bell’s investment director Russ Mould says: ‘Total returns from the UK stock market in 2024 handily beat cash, bonds and inflation, but the poor comparisons with the USA remain the stick with which the FTSE 100 is constantly beaten.’

• Find out more: how to buy shares

Which sectors could drive the FTSE’s growth in 2025?

Unlike the tech-heavy American Nasdaq, the FTSE 100 has a much broader spread of firms.

In particular, most of the FTSE’s growth in 2025 is expected to come from financial firms (29% of pre-tax profit growth), oil and gas concerns (16%), consumer goods (13%) and mining operations (11%), according to AJ Bell.

The savings and retirement focused Phoenix Group is currently the highest dividend yielding stock on the index, followed by asset manager M&G, life insurance firm Legal & General, and British American Tobacco.

The biggest dividend increases last year came from Rolls Royce, International Consolidated Airlines, AstraZeneca and Admiral Group.

Russ Mould says: ‘The slant of earnings towards oils, miners and banks means the FTSE may be one of the indices better suited to deal with an inflationary or stagflationary environment.'

Highest yielding FTSE 100 dividend stocks

^{Source: AJ Bell, Company accounts, Marketscreener, consensus analysts’ forecasts, LSEG Datastream data. Ordinary dividends only. Accurate 7 January 2025.}

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How to invest in the FTSE 100

You have a couple of options if you want to invest in the FTSE 100.

First, you could buy shares in individual firms through an investment platform such as AJ Bell or Hargreaves Lansdown. 

Alternatively, many platforms offer a variety of investment funds and trusts which track the FTSE 100, either actively or passively.

As an example, if you had invested £20,000 in the FTSE at the start of 2022, it would have been worth around £21,840 by the start of 2025. And that’s without accounting for any dividends, reinvestment or share buybacks.

Remember that a diverse portfolio will reduce the impact of short-term market dips, and any investments made through a stocks and shares Isa will be tax free.

‘UK stocks feel unloved, and unloved can mean cheap. And buying cheap, rather than blindly taking risk, is usually the best possible way of getting good long-term returns,’ adds Mould.

• Find out more: best investment platforms in the UK 2025