FTSE 100 busts record high

At the closing bell on Tuesday the FTSE 100 stood at 6949.63, surpassing the previous record close of 6930 set on 30 December 1999.

During the day the index of the UK's largest listed companies also broke its record for intra-day trading of 6950, which was also set on 30 December 1999.

Rebecca O'Keeffe, head of investment at our sister website Interactive Investor, says: 'With Greek reforms having staved off a potential crisis for the near term, and the weight of liquidity and lack of alternative options also driving people towards equities, investors will be hoping that the index can sustain its momentum and go through 7000 and beyond.'

Dividends since 1999 have averaged just over 3 per cent per year, generating a 60 to 70 per cent return if reinvested. When you take inflation into account, however, the results are less stellar.

SHOULD INVESTORS SELL OR HOLD?

Hargreaves Lansdown's Laith Khalaf says that on balance, when including dividends but also accounting for inflation, the index falls ahead of the consumer prices index but behind the retail prices index, which includes house prices.

O'Keeffe adds: 'In addition, rather than buying once and holding for a protracted period, most investors typically add to their portfolio on a regular basis. This improves long-term returns as investments are effectively made at the long-term average of the FTSE, and we are well above that today.'

However, Khalaf warned that it's hard to say whether now is the time to sell, or time to hold.

'The current level of the FTSE is underpinned by company profits to a much greater extent than it was in 1999. The economic backdrop is also encouraging for UK companies, with low interest rates, low inflation, and growth forecasts rising.

'However, risks still lurk in the background. The agreement reached in Europe is a sticking plaster to allow further negotiations to take place and may well flare up again. The UK election will also cause some thrills and spills, as markets weigh up the implications of potential outcomes.'

For a closer look at what this means for investors, click here for more in-depth analysis of the FTSE's all-time high.

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