The best UK shares and funds as FTSE 100 hits new highs

Investors who have stuck with top UK shares and funds may finally be rewarded.

The FTSE 100 hit record highs this month after breaking through the 9,000 barrier and there are plenty of shares and funds that are benefiting from its resurgence.

It comes as the UK stock market has lagged other countries in recent years, with the S&P 500, Nasdaq and Dow Jones dominating in the US amid the rise of the Magnificent 7.

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But new political and economic uncertainty now seems to be driving interest in more established brands, many of which are listed in the UK.

Year-to-date, investors would have already made a 14.3% total return including dividends from a FTSE 100 tracker fund, excluding charges.

That is better than the S&P 500’s return of 9.2% over the same period.

Dan Coatsworth, investment analyst at AJ Bell, said: “It’s been a wonderful time to invest in UK shares. The FTSE 100 recently went through the 9,000 level for the first time and has hit a new record high on multiple occasions this year.”

What is driving the UK stock market?

Concerns about rising taxes and high inflation in the UK may make it hard to believe that the financial markets are actually doing well.

But the country’s relative political stability is looking attractive especially with concerns across the pond with US president Donald Trump’s trade tariffs and wider geopolitical tensions.

The FTSE 100 is full of the type of stocks that appeal to investors when there is uncertainty in the world, adds Coatsworth.

He said: “Investors seek companies with defensive qualities and the UK market has them in spades.

“Industries including tobacco, utilities and telecoms typically have steady earnings. They provide services which consumers and businesses need, and certain companies fall under the category of non-discretionary spending. We all have to pay energy and phone bills every month.

“The UK stock market has a wealth of defence contractors which have attracted investor interest against a backdrop of increased government spending on areas like cybersecurity and military forces.”

Valuation is another reason that UK stocks are attracting investors, especially out of US markets.

Coatsworth added: “American shares are expensive when you look at popular valuation metrics. For example, the S&P 500 index trades on 22.2 times next 12 months’ earnings. Between 2014 and 2020, the index was on a much lower multiple, trading between 14 and 18 times earnings.

“In contrast, the FTSE 100 trades on a mere 12.6 times forward earnings. The UK market has been subject to widespread takeovers in recent years, and this trend remains intact in 2025 as the valuation anomaly continues to attract bidders.”

The best FTSE 100 stocks

Mining and defence stocks are among the best performers so far this year.

Mexican precious metals mining company Fresnillo is up 139%, while defence firm Babcock is up 110%.

Coatsworth added: “Gold is often popular with investors during periods of uncertainty such as heightened geopolitical tensions. The price hit a new record higher earlier this year and that has created a tailwind for precious metal miners, including Fresnillo whose shares have more than doubled in value since January.”

He said banks and insurers are also popular due to their stable dividend payments.

The best FTSE 100 funds

Buying the top performing shares individually can be pricey but there are some funds that have managed to outperform the market so far this year.

The top performing UK fund year-to-date is SVS Zeus Dynamic Opportunities, up 24.4%, which invests across all company sizes listed on the UK stock market.

It has a concentrated portfolio that includes stakes in defence and engineering groups Rolls-Royce and Chemring, airline EasyJet, and supermarket chain Tesco. Its outperformance can be attributed to clever stock picking.

Better known is Ninety One UK Special Situations which positions itself as a ‘best ideas’ UK portfolio with a value tilt. It is up 20%

Rolls-Royce is once again present, while it also invests in airline Jet2 and cigarette maker British American Tobacco.

Coatsworth said: “While nearly half of the companies in the FTSE 100 have beaten the overall index year-to-date, not everyone likes to buy individual stocks and shares. Those investing in funds were still able to outperform the market if they picked the right instruments.”