FTSE 100 vs S&P 500: which offers me better value right now?
Jon Smith puts on his thinking cap when deciding whether it’s better to allocate funds to the UK or the US via the S&P 500.
Published 8 October
When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.
Both the main FTSE index and the S&P 500 have hit fresh record highs within the past few weeks. This presents UK investors with an interesting dilemma. With new cash to put to work, does it make more sense to stick to the UK stock market, or is it worth buying AI high-flyers listed across the pond? Here’s where my head is at right now.
The case for the FTSE 100
The most obvious reason to root for the FTSE 100 is on the basis of the price-to-earnings (P/E) ratio. It’s currently at 17.7, versus 31.3 for the US stock market. Therefore, even though both indexes are near record levels, I’d argue the FTSE 100 could rally further. This is because the ratio is less stretched than in the US. Not only that, but there’s a large difference in the average P/E ratios.
Another factor is the dividend yield. The average yield of the FTSE 100 is over double the S&P 500. So let’s say that we do get a correction in global stocks before the end of the year. If an investor has a good portion of UK holdings, the income payments from dividends can help to cushion any potential unrealised losses from the share price movements. This might not seem like a big deal, but it can certainly be a helpful element when thinking about where the real value is.
Don’t forget the S&P 500
Despite the value appeal of the FTSE 100, there are reasons to like the US. The S&P 500 offers exposure to the global leaders in AI, tech, and healthcare, areas that have generated sustained compounding returns in recent years. Investors simply can’t replicate this in the UK.
The US economy has proven far more resilient than the UK’s, with lower recession risk and higher productivity growth. That’s another appeal to diversify a portfolio away from the UK.
Overall, I think the UK is better value right now, but investors can look to build a portfolio with some exposure to both, getting almost the best of both worlds.
When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.
If an investor has £10k of idle savings and wants to put that money to work, dividend shares are one way to aim for a second income. The idea is that certain companies pay a slice of profits to shareholders each year and, over time, they can deliver a steady flow of cash.
Of course, not all companies are equal, so the right shares must be chosen and the risks weighed. When I hunt for dividend shares, I take time to consider the type of products or services that the company offers and whether they will still be relevant in 10 years time.
Beyond that, it’s important to assess the short-term viability of a company’s balance sheet, debt situation and cash flow.
Let’s take a look at what £10k invested in dividends could potential achieve.
How lucrative can it be?
Suppose £10,000’s invested for 20 years and the total return (price appreciation plus dividends reinvested) averages 8% a year. Over that time period, the pot would reach a point that an 8% dividend yield would equate to an annual income worth nearly £4,000.
Sure, it’s not house-buying money — but it’s a decent chunk of spare cash each year for holidays or retirement savings. Keeping in mind though, that dividends are never guaranteed and share prices can fall, so the total return could vary.
That’s why diversification matters — spreading money over several stocks rather than putting it all in one.
Aiming high — is an 8% return realistic?
An 8% average return’s ambitious but not beyond reach. Many dividend stocks yield 6% or 7%. With moderate growth added, total return might land in the 8%-9% zone.
One firm an investor might check out is Rio Tinto (LSE: RIO), the FTSE 100 mining heavyweight. Historically, it has offered yields of around 6% to 7% in good periods, though it recently trimmed its interim dividend so now its current yield’s closer to 5.7%
Over the past decade, the mining giant’s total return has been roughly 227% — that’s about 12.9% annualised. Yet that figure hides the bumps: mining is cyclical, and Rio’s earnings swing with commodity prices. As mentioned, weak iron-ore prices and rising tariffs hit profits and prompted a dividend cut.
Other risks include the heavily regulated mining industry, past reputational controversies, and currency fluctuations. Since most of its operations are global, exchange rates can erode dividend value in GBP terms.
Weighing risk vs return
While a stock like Rio offers an intriguing mix of yield and growth, investors must weigh up risks and spread exposure. Putting £10k into dividend shares isn’t a magic trick. But it can form a credible route toward a regular second income. When compounded over decades with shares offering both yield and growth, an 8% return’s within the realm of possibility.
Still, dividends are never certain, and sectors like mining carry extra volatility. An investor should always think about balance, diversify across companies and industries, and monitor the financial and regulatory environment.
This approach offers a pathway — not a promise — to turning spare savings into a meaningful second income.
When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.
The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.
Supermarket Income REIT (LSE:SUPR) has a 7.75% dividend yield. That means a £1,000 investment is set to return £77 in cash in the next 12 months.
A high dividend yield and a share price below £1 make the stock look cheap and there’s a lot to like about the business. But can passive income investors do better?
Should you buy Supermarket Income REIT plc shares today?
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.
First impressions
A high dividend yield can mean investors are concerned about something. But at first sight, it’s not easy to see what that might be in the case of Supermarket Income REIT.
The firm has a fully occupied portfolio of 73 properties with all the major supermarkets as tenants. This has led to reliable rent collection in recent years.
With the average lease having over 10 years to expiry, it’s likely to stay that way for some time. And for investors worried about inflation, uplifts are built into most of its contracts.
There’s always uncertainty, but a 7.75% return from a durable source of passive income looks like a nice opportunity. But a closer examination reveals what investors might be concerned about.
Debt
Those long leases definitely help remove a lot of uncertainty, but there’s also a downside to them. It means Supermarket Income REIT has limited scope to increase rents above inflation.
By contrast, the firm’s loans have an average time to maturity of less than four years and it’s likely to have to refinance its debts when they come due. There’s a real risk this could involve higher interest payments. But with tenancies still having years to run, Supermarket Income REIT might not be able to increase rents to offset this.
With the company’s profits currently below its dividend, higher costs aren’t something the firm needs. And this might be a serious concern over the viability of the dividend.
Growth
Another potential issue is growth. That can be a real challenge for REITs that are required to distribute 90% of their taxable income to shareholders.
That means the firm has to use debt to expand its portfolio. And with initial yields just over 7% compared to a cost of debt that’s just above 5% makes margins relatively tight.
But the company has been working to bring down its costs through a series of organisational changes. And this could also provide a valuable boost to profits.
Risks and rewards
With Supermarket Income REIT, loans that mature before leases expire are a potential risk. And the firm’s cost of debt isn’t far below the rental yields it has been achieving recently.
There is, however, something that could change this quite dramatically. Falling interest rates could boost the value of the company’s portfolio while lowering its debt costs.
That’s been the direction the Bank of England has been heading in recently and I think it could well continue. So a fully-occupied portfolio with reliable tenants means an investor with a spare £1,000 might consider 1,259 shares in Supermarket Income REIT.
You had LWDB in your watch list but wanted a higher yield than 2%.
The covid crash gave you the opportunity, you had no way of knowing where the bottom of the market would be but when the price fell to 400p the dividend was 26p a yield of 6.5%, having already done your research you buy.
The dividend has risen to 33.5p, a yield on the buying price of 8.25%
You plan was to simply re-invest the dividends back into the share.
The current yield is 3.15% so you could take out all your profit and leave your seed capital and re-invest part in a higher yielder and part in a safer fund so you had funds for the next market downturn, whenever that occurs.
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Brett Owens, Chief Investment Strategist Updated: October 8, 2025
The manic market just dumped business development companies (BDCs), again. These three dividend stocks paying up to 11.7% are poised to bounce back when sanity returns.
BDCs, which lend money to small businesses, are on the “outs” with the Wall Street suits after multiple soft jobs reports. The spreadsheet jockeys fret about an unemployment-induced economic slowdown and miss the real story: small businesses are making more money than ever thanks to AI.
Here is what’s actually happening in the Main Street economy:
Employers—especially nimble small business owners—are implementing AI to streamline and even run their operations.
With AI tools, fewer humans are needed.
So, we are seeing soft jobs reports as companies rationally prioritize automation over human hiring.
Small business profits are popping. While the unemployment numbers scream slowdown, the actual economy is booming. Check out the Atlanta Fed’s most recent GDPNow estimate—it’s up almost 4%!
Atlanta Fed Says Economy is Cookin’
We’ve been on this beat for months here at Contrarian Outlook. Automation is not slowing the economy. It is making it leaner and wildly profitable. While payrolls cool, output keeps rising. That’s no recession—it’s an efficiency boom!
This is music to BDCs’ ears. These lenders profit when Main Street’s cash flow swells.
So, we thank knee-jerk sellers for giving us a deal on FS Credit Opportunities (FSCO), which yields 11.7% today. FSCO has been around for 10+ years but only traded publicly as a closed-end fund for the last two. CEF investors loathe newness, so FSCO fetched a discount to net asset value (NAV) until recently.
Portfolio manager Andrew Beckman and his team are skilled at “layering” credit—structuring loans with different levels of protection—so that FSCO is positioned to get paid back first even if credit conditions worsen. It’s an ideal fund to own if you were worried about the economy. This cash cow keeps collecting through slowdowns.
FSCO extends high-quality loans that are not subject to the daily whims of the public markets. These are private credit vehicles held by sophisticated investors who don’t care about recent job reports—they want their yield!
As do we income investors.
The vanilla dividend chasers finally found their way to FSCO this summer, sending it to a record 3% premium to NAV. But these weak hands fled when FSCO paid its monthly dividend (uh, the price drops because you just got paid, people!) and weak employment numbers weighed on the BDC sector.
The result? FSCO slipped from a 3% premium to a nifty 9% discount last week. Investors panicked but the strength of FSCO’s loans didn’t change:
FSCO Shares Went on Sale
FSCO continues to post strong credit metrics and cover its payout comfortably. Its high loan yields led Beckman and his management team to raise the monthly dividend multiple times this year:
FSCO Pays Monthly, Raises Often
FSCO looks good here, and it’s not alone. Ares Capital (ARCC), the largest BDC in America with $22 billion in assets, is killing it.
Ares is the big bully on the block—it sees the best deals before anyone else. And it shows. Non-accruals—loans that aren’t paying—remain a mere 2% of the portfolio, a hefty 20% below the industry average of 2.5%. No wonder ARCC’s net investment income (NII) has consistently covered its quarterly dividend, now $0.48 per share, with a small surplus each quarter!
And this bully loves economic turbulence. It thrived in 2020, growing book value through the Covid panic while smaller rivals stopped lending. And we have evidence that the punier BDCs are retrenching again, leaning into existing borrowers rather than pursuing new loans.
When the smaller fish throttle back, the bully turns up the volume. ARCC yields 9.5%, a payout supported by current income. That’s a rare combo of yield and quality in this market. We’ll keep collecting the digital checks.
ARCC’s Well-Covered Dividend
Last but not least, Main Street Capital (MAIN), is the steadiest grower in BDCLand. Not only has it paid monthly since 2008—hasn’t missed a beat—but it also adds quarterly “specials,” rewarding shareholders when portfolio income exceeds expectations.
MAIN invests in small, privately held businesses—between $25 million and $500 million in annual revenue—and takes both debt and equity stakes. This dual role lets it profit as a lender and as a partial owner when its companies thrive.
In the main, MAIN’s portfolio remains broad and balanced—about 190 companies across diverse industries, with no single position over 4%. That diversity keeps MAIN steady through economic cycles.
Since 2009, total annual dividends have jumped from $1.50 to more than $4 per share, a 170%+ climb that few serious dividend payers can match. The current yield sits around 6.8% today:
MAIN Regularly Raises Its Monthly Dividend
MAIN currently pays a generous 6.8%, with the majority delivered through dependable monthly payments. Check out this pretty payout picture:
MAIN pays monthly while ARCC “only” dishes its dividend quarterly.
Market corrections: something to fear – or a buying opportunity? Market corrections can make novice investors nervous
Sitting tight is often better than selling up
The best mindset is to see corrections as buying opportunities Wednesday, 8th October 2025
Dear Fellow Fools,
Years back, I remember reading an angry message from a poster on an Internet investment forum. He’d been investing in an index tracker on an investment platform, it seemed, and – as happens from time to time – there had been a market correction.
The market had ‘corrected’ – that is, fallen – by 10% or so. And so, naturally enough, the value of our hero’s index tracker investment had also fallen. By exactly 10%.
How could this happen, he raged. How could the index tracker’s managers have been stupid enough not to liquidate the tracker’s underlying investments at the first sight of trouble, when – apparently – a 10% market correction was blindingly obvious for all to see?
Our hero could not be mollified, despite the best efforts of other forum members. It mattered not to him that an index tracker’s job is to track the index, and that it had done just that. Perfectly, at low cost.
He was down 10%. And investing, he raged, was a total scam.
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Timing the market is a rare gift Clearly, he was mistaken on many, many fronts.
And it’s true that the managers of a different kind of investment fund might indeed have liquidated a part of its holdings – but only a part.
Because if there’s one thing that more difficult than judging when liquidating investments might be prudent, it’s judging when to buy back in.
And as we saw after the financial crash of 2007-2009 – when the FTSE 100 fell 48% – the difficulty of timing when to buy back in caught out plenty of those who decided to ride out the worst of it in cash.
I saw plenty of people back in late 2010 and 2011 who realised, ruefully, that they’d left it far, far too late.
Given the old adage about “time in the market” being better than “timing the market”, it’s often better, in my view, to just ride out the storm. That way, you’re at least sure of catching the upwave when it comes.
Don’t sell – buy! But our investor missed another important point.
Rather than selling, he should have bought. Market corrections can make a perfect time to ‘average down’ an existing holding, or get a good entry price for a new holding.
For income investors, there’s yet another attraction: with an unchanged dividend, a 10% drop in the share price delivers an 11% increase in the yield. Do the maths – see for yourself.
And bigger price falls produce a commensurately higher yield, of course.
Seasoned investors recognize this, of course. It’s what “buying the dips” means.
When to be greedy And occasionally – as with the financial crash of 2007-2009, or Black Monday in the 1980s, or Covid, or the aftermath of the Brexit referendum – falls in the market can be precipitous.
Rather than liquidating their investments and getting out of the market, many seasoned investors see such events as a rare opportunity to load up on quality businesses that have been marked down by general market turmoil.
American-British investor Sir John Templeton – the Warren Buffett of his era – summed it up well: “Buy when there’s blood in the streets”.
Warren Buffett himself said much the same thing: “Be fearful when others are greedy, and be greedy when others are fearful.”
It can call for strong nerves, I grant you. But when normal market valuations return, the resulting portfolio will be its own reward.
Until next time,
Malcolm Wheatley Investing Columnist, The Motley Fool UK
A market correction is an opportunity, unless your plan is to use the 4% rule and if that happens just as you start to spend your hard earned it’s a disaster.
With hindsight it’s easy to see the bottom of the market but in real time it’s much more difficult but as prices fall the yields rise and if you are happy buying the yield the risk is reduced. Remember there is no such thing as a risk free trade. GL
Bubble Can Push S&P 500 to 9,000 By End of 2026, Julian Emanuel Say
“It’s bigger, more, grander every time,” says Julian Emanuel, chief equity and quantitative strategist at Evercore ISI, as he sees a 30% chance that a bubble scenario can push the S&P 500 to 9,000 by the end of next year.
SMIF Current profit of £708 of which £408 are dividends.
I’ve booked the ‘profit’ of £300 which when added to the current cash and the dividends next week from RECI and RGL, which could be added to the ORIT position.
In the US on Tuesday, Wall Street ended lower, with the Dow Jones Industrial Average down 0.2%, the S&P 500 down 0.4% and the Nasdaq Composite down 0.7%.
“Investors took a breather from buying US stocks yesterday, near all-time highs, as a report showing Oracle’s profit margins were much lower than expected dampened the euphoria that followed the OpenAI and AMD announcements earlier in the week,” Swissquote’s Ipek Ozkardeskaya said. “But data centre demand is expected to rise exponentially through 2030 largely driven by AI…That outlook helps explain why dip-buyers stepped in as Oracle shares fell to around USD270. And that small bump will likely be forgotten quickly, with this morning’s news that Nvidia is considering investing USD20bn in Elon Musk’s xAI.”
She continued: “The real question isn’t whether AI will grow, but whether market pricing has run ahead of itself. And no I don’t buy for a second that AI models won’t generate revenue. There will certainly be losers, but also major winners.”
Ozkardeskaya noted that “the question of a bubble looms” but added: “Evercore ISI, in a note titled
A Big Beautiful Bubble, argues that while the S&P 500 is indeed in bubble territory, it likely has room to expand possibly pushing the index to 9,000 by the end of next year with a 33% probability.
“Eye-popping, yes, but they argue that rate cuts, improving sentiment, stronger earnings, reduced uncertainty and productivity gains from AI could keep investors piling in before the bubble eventually bursts…There’s also still ample room for leveraged investors to join the rally, given that net short positions in the S&P 500 remain deeply negative. The takeaway ? Don’t fear the bubble play along.”
