The FTSE 100 The blue-chip index started 2025 hitting an all-time high of just over 8,445 on May 15 before retreating. Last week was a tough one as investors worried about US interest rates. The index threatened to fall below 8,000 again before rising.

So taking a picture today and drawing stern conclusions is a bit unfair. When AJ Bell it appeared on December 17 that it was up 7% year over year, but is now down to 4.7%. Because we can’t repeat enough on A motley foolshort-term movements do not count. What matters is the long-term perspective.

British blue chips seem undervalued to me

The FTSE 100 doesn’t just provide capital growth when share prices rise. Its shares are complemented by dividends, buybacks and share takeovers. AJ Bell’s chief investment officer, Russ Mold, says once this information is taken into account, the effect is this “mix the prevailing bearish tone of commentary on UK equities”.

Added: “UK stock market total returns in 2024 easily outperform cash, bonds and inflation, but poor US comparisons remain the stick with which the FTSE 100 continues to be beaten.”

Oh yes, USA. The S&P500 since the beginning of the year it has increased by 25%, beating every index in the world. However, it cannot compete with the FTSE 100 on dividends because its average yield of 1.22% is lower than the FTSE 100’s 3.6%. This matters over time.

On December 10, AJ Bell said that after taking into account dividends, buybacks and acquisitions, the FTSE 100 had had its best year since 2021, achieving a total return of 11.4%.

Using this data, an investor who deposited £10,000 at the beginning of January would have £11,140 today. That’s 1,140 pounds more than when I started.

I buy individual stocks instead of tracking an index. So far this year, 18 companies have generated total returns greater than 30%, and about half of the index has generated double-digit returns.

Owner of British Airways Consolidated International Airlines Group (LSE:IAG) is the biggest winner. Its shares have increased by 95% since the beginning of the year.

I also saw its potential when I wrote on November 29, 2023, what the IAG share price looked like “ridiculously cheap, trading at just 3.8 times forecast 2023 earnings”. Unfortunately, I didn’t put my money where my mouth was.

In 2025, the share price may augment

IAG is shaking off the grim legacy of the pandemic, which has left it with €11.6 billion in maintenance debt as its fleets are grounded.

Third-quarter results on November 7 showed profits up 43.5% to €1.75 billion, with flight utilization at 95.6%. The management board also resumed dividend payments.

Like any airline, it remains exposed to a number of threats. Rising oil prices can raise costs, wars can close routes, and natural disasters can cause chaos.

However, I believe the stock looks set to do well in 2025 as well, given its continued low valuation of just 7.2 times trailing earnings.

This is a pattern across the FTSE 100. UK shares are roughly half the price of US shares. And there’s even more revenue ahead. As Russ Mold notes: “Analysts believe that FTSE 100 total pre-tax income in 2025 will exceed the 2018 pre-pandemic peak by £78 billion, or around 46%.”

Next year I will be focusing my investing efforts on the FTSE 100. I feel like I missed my opportunity with IAG, but I’m now on the lookout for stocks that can emulate its success in 2025 and beyond.