So far, 2026 is a good year for the stock market. The FTSE100 the index of leading British companies has reached a modern all-time high.

Some people like the idea of ​​so-called passive investing. This means they buy shares in a fund that largely mirrors or ‘tracks’ the performance of an index such as the FTSE 100. Hence the name ‘index tracker’.

Given the powerful performance of the FTSE 100 last year, this could have been a lucrative approach.

Strong price increases

Over the last 12 months, the FTSE 100 index has gained 19.6%. This means that £5,000 invested a year ago will now be worth around £5,980.

Not only that, but there would also be dividends along the way.

The FTSE 100 yield is 2.9%. Someone who invested a year ago would earn a higher rate of return due to the lower purchase price (the rate is a function of the annual dividend and the amount paid for the stock).

So £5,000 invested in the FTSE 100 a year ago should yield around £174 in dividends.

Index trackers typically charge some fees, which would likely impact returns.

However, with so many passive investors in the market, there is a lot of competition. Therefore, in some cases, these fees can be quite compact.

I don’t buy the index

While the FTSE 100 has had a good year, not all of the 100 companies on it have.

In fact, this kind of mixed performance helps explain why I don’t own any index-tracking stocks.

Instead of “buying the index”, I prefer dynamic investing. In other words, I buy a mix of individual stocks that I believe are attractively priced relative to their long-term commercial prospects.

Lost share of blue chips

For example, one of the shares I own is JD Sports (LSE:JD).

It is a member of the FTSE 100 index, but recently its performance has significantly diverged from the broader index. The share price has fallen 4% over the last 12 months.

There are reasons for this, including the profit warning in January. Given the currently rather frail consumer sentiment, demand for pricey sportswear and footwear may decline.

The company’s results in recent years reflect its development expenses. Revenue was up 9% last year, but net profit actually fell.

Hopefully, the long-term benefits of expansion will become more clear and the costs in the rearview mirror may mean increased profits.

Based on this, I think the current JD Sports share price, in penny terms, looks economical.

The dividend is not too great to write home about and amounts to just over 1%. However, a company’s cash generation may also mean dividend growth over time.