It has been a great year for US shares as the bull market in them has continued to run. In recent years, an investment in a low-cost index-tracking fund based on the S&P 500 has handsomely beaten the returns that most fund managers have been able to generate from UK shares. But with the US index at a record high, it seems only reasonable to ask whether the good times can last?
Over the past five years the Vanguard S&P 500 ETF (VOO) has delivered total returns of 87.6 per cent to UK investors, according to Morningstar. Only eight active funds in the UK All Companies sector have managed better than this. A bull market in US shares and the weakness in the value of the pound against the US dollar have made the S&P 500 a simple yet very effective choice for UK investors.
This year has been no different, with the S&P 500 delivering total returns of 27.4 per cent to 18 December in US dollar terms and 24.6 per cent to UK investors in the Vanguard ETF. Even though the FTSE All-Share index has had a good year its total returns have fallen short with a performance of 18.7 per cent. Over the past decade the S&P 500 has delivered total returns of 190 per cent (in US dollars) compared with the FTSE All-Share’s 126 per cent.