The FTSE 100 has hit another record high this week, posting 15% growth since the start of the year, but experts still claim UK shares are undervalued – meaning there could be good deals to be had.
Gains are being driven in particular by the financial sector, as well as the FTSE’s defensive qualities and income-generating credentials. A bumper forecast of £130.4bn in dividends and share buybacks adds an extra sweetener for investors.
Read on to find out what’s propelling the UK stock market to new heights, the top 10 best-performing UK funds of 2025, and how you can invest.
Please note: the content contained in this article is for information purposes only and does not constitute financial or investment advice.
FTSE on the accelerator
The UK’s main stock market index – which tracks the 100 biggest companies listed on the London Stock Exchange – climbed above 9,500 earlier this week, setting a new record. The index rises when the total value of these companies’ shares increases.
Strong performances from some of the key companies that make up the index have helped drive the FTSE’s rapid growth this year.
In particular, healthcare firms such as GSK and AstraZeneca have benefited from treatment innovations and postponed US tariffs. Banks like HSBC and Lloyds are making profits from higher interest rates, and miners like Fresnillo have been buoyed by rocketing gold and silver prices.
But experts think there’s more happening under the surface that’s helping to charge the UK stock market’s growth.
‘With President Trump’s unpredictable policymaking, and the full effect of tariffs on the global economy uncertain, there’s more demand for assets which offer stable returns,’ said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
‘Many companies on the FTSE are multinationals with wide global sources of revenue and are highly cash generating, so are more reliable dividend payers. The dividend-strong FTSE 100 is coming into its own.’
As an extra incentive, dividends in 2025 are expected to hit £88.3bn across the UK market, according to Computershare’s dividend monitor. The FTSE 100 is expected to generate the bulk of this – £79.4bn (90% of the total) as reported by AJ Bell, which rises to £130.4bn when you add in share buybacks.
FTSE 100 year-to-date
The FTSE 100 index has reached a record-high valuation.
- Find out more: best investment platforms in the UK 2025
Which are the top UK funds?
It’s been a great year for UK shares, but an even better one for certain UK funds.
Investment funds allow you to pool your money with that of other investors to buy a diversified portfolio of assets, such as shares from different companies, bonds or property.
‘The scale of outperformance from certain funds is truly impressive,’ said Dan Coatsworth, head of markets at AJ Bell. ‘The best-performing UK funds have been pouring the equivalent of liquid gold.’
Top UK funds year-to-date
Source: AJ Bell, FE Fund Analytics
Passive funds are designed to follow the performance of a market index such as the FTSE 100 or Dow Jones. They usually do this by buying shares in all the companies in that index, in proportion to their market value.
Actively managed funds are run by portfolio managers who select shares, bonds and other assets with the aim of outperforming the market.
Topping the pile is SVS Zeus Dynamic Opportunities, which has returned 28.4% this year. The actively managed fund aims to generate capital growth in excess of the FTSE All-Share, has an ongoing charge of 1.23%, and its top holdings include Rolls-Royce, Tesco and Chemring Group.
Meanwhile, Barclays UK Equity Income tops the list of income (dividend) generating funds, with a return of 20.6%. The fund seeks to achieve an income in line with, or in excess of, the income of the FTSE All-Share over a five-year period. It has an ongoing charge of 1.1%, and top holdings include BP, Johnson Matthey and Barclays.
Top 10 UK Equity Income funds year-to-date
Income funds invest in companies that consistently pay dividends, with the goal of generating a regular income for investors.
Source: AJ Bell, FE Fund Analytics
- Find out more: how to invest in funds
Is now a good time to buy UK shares?
UK-listed firms as a whole have made strong returns, ahead of the US market and level pegging with the Eurozone according to Morningstar UK.
Despite these gains, experts point out that UK stocks are still undervalued overall, which make a compelling case for investment.
Speaking to Morningstar UK, Michael Field, chief European market strategist at Morningstar, said: ‘The UK is cheaper than the US, but it’s also cheap relative to the rest of Europe. With the US trading at a slight premium, the UK represents good value.’
According to the investment research company, basic materials (mining and metal refining), real estate, and healthcare companies in particular are more undervalued than the wider market.
- Find out more: how to buy shares
What to look for when you invest
It’s important to always do your research when picking shares or funds to invest in.
For companies, you should check their current and predicted profits, debt position, share price growth, cash holdings, and the price-to-earnings ratio (which measures a company’s share price relative to its earnings).
For funds, be sure to check its stated aim, look at the annual fees, research their portfolio of holdings, past performance, and net asset value (NAV, which measures the overall value of an entity’s assets minus liabilities like debt).
This might sound intimidating, but there are plenty of resources available to help you. Most investment platforms, for example, should have all of this information readily available, and many have in-built tools to help you.