I’m tempted by the thought of putting my cash into a FTSE 100 tracker fund, and then just sitting back and watching.

The FTSE 100 is up 11.7% in the past 12 months, so it seems like a good idea. But it’s been a good year, after a few pretty bad ones.

Still, over the past 20 years (which includes the pandemic crisis, and a load of global economic woes), we’ve seen an average annualised FTSE 100 return of 6.9%.

Over the long term, I reckon that would be pretty good for no effort on my part.

Tracker fund

What might a full year’s Stocks and Shares ISA allowance of £20,000 be worth today, if I’d invested it 12 months ago?

Here’s what the share price of the iShares Core FTSE 100 UCITS ETF (LSE: ISF) looks like over time:

Scary name

Don’t be put off by that complicated long name, as it’s a popular FTSE 100 tracker. The ‘ETF’ part means it’s an exchange-traded fund. And all that means is we can buy and sell shares on the stock market whenever we like, just like any other stock. What could be better?

Anyway, over the past 12 months, the share price is up 11.1%. It’ll always vary a bit from the index, as no tracker can be 100% precise. There are charges to cover too, though they’re modest. And the vagaries of people buying and selling will move it around too.

So that gain alone would have turned £20,000 to £22,220.

Dividends too

But most FTSE 100 companies also pay dividends, and the iShares FTSE 100 is on a forecast 3.8% dividend yield this year.

It could add £762 to the pot.

Now, I must raise some cautions here. This ETF invests its cash across a wide range of the top FTSE 100 stocks. That provides safety in diversification, which I rate as essential for investors.

But even with that, the UK stock market still goes through bad patches. The average Stocks and Shares ISA lost 13.3% in the 2019-20 year. And I think we got off very lightly from the 2020 stock market crash with such a quick rebound. There have been longer ones, and I expect we’ll see more.

Starting out

But the longer we invest in the UK stock market, the better and less volatile our returns are likely to be. At least, that’s what nearly 150 years of experience has shown us. It could change in the future, but I think it’s unlikely.

Going for a FTSE 100 ETF like the iShares one is, I think, a great approach for a new investor to consider.

It’s straightforward, and avoids all the research and head-scratching needed to dig out and buy our own individual shares.

Doing all that for me is part of the fun. But we can learn and do as much, or as little, as we want in our next ISA year. Or the one after that.