As I write, the FTSE 100‘s trading at 8,760, within a few points of its all-time high. The Bank of England’s decision to cut interest rates on Thursday (6 February) helped nudge the UK’s blue-chip index higher.
But in reality, the big-cap index has been performing well for a while, up by nearly 6% in 2025. It’s risen by 14% over the last 12 months, plus dividends (around 4%).
I don’t mind admitting that my own portfolio lagged the big-cap index last year. One reason is more of my shares are mid-sized FTSE 250 companies. Some of these haven’t done so well recently.
Things could turnaround for me in 2025. Or they may not. There’s a risk my shares will continue to lag the market. And maybe I’m just buying the wrong shares.
Should I give up stock-picking?
I spend a lot of time researching investments and managing my portfolio. I enjoy it. But the reality is that there’s a chance I could make more money to support my retirement by simply investing in an index tracker fund. I’d have had more time for other hobbies too…
Given this risk, should I stop buying individual shares and simply put my money in a FTSE 100 fund? This is a personal decision, but for me the answer’s no.
One reason is that I enjoy researching shares and learning how businesses work. The second reason is that I’ve decided to accept the risk of underperforming, so I have the opportunity to find out if I can beat the market.
Here’s an example
One share in my portfolio I have high hopes for at the moment is £500m translation and localisation specialist RWS Holdings (LSE: RWS). This business is a market leader in this sector. It serves customers in areas ranging from consumer goods through to regulated markets like law and medicine.
RWS shares have had a terrible run since 2022, falling by more than 60%. Some of this is justified, I think. The company’s suffered from a slowdown in several important markets. Profits are down by around 25% since then.
There’s also a bigger risk that some of the company’s services could be made redundant or devalued by general artificial intelligence (AI) services. Although RWS has always used computer translation, new-generation AI services are seen as more of a threat to the business by some investors.
Of course, RWS is developing its own AI services. These combine the latest technology with other useful features for business customers, such as content management and human oversight.
I’ve spent some time looking at this before investing. My view is that over time, many of the company’s customers are likely to continue using RWS to provide a guaranteed, enterprise-quality service.
Right now, it’s too soon to be sure. RWS is having to invest heavily in IT to develop its new AI-led services, and there’s no guarantee this spending will pay off.
However, the stock now trades on a 2025 forecast price-to-earnings ratio of seven, with a 9% dividend yield that’s still covered by earnings. If RWS can deliver as hoped, I think its shares could be very cheap at this level and are worth considering.
This post was originally published on Motley Fool
