What is the FTSE 100 Index? Complete Beginner’s Guide

The FTSE 100 is generally not a good catch-all barometer for the UK economy. In October 2022, FTSE Russell showed how the FTSE 250 has far less international exposure (and by extension may be a better barometer for UK investors). By understanding the FTSE 100, you can better grasp how the UK stock market functions and make more informed investment decisions. Understanding the FTSE 100 can be a great starting point for those new to investing, as it provides insight into the performance of major UK-listed companies. Many UK and EU companies have chosen to move their listings to as ADRs (American depository receipts) on the US share markets. Among them last year was construction rental company Ashtead (AHT.L), which —  after being on the exchange for four decades — announced plans to move to a US share market with the support of shareholders.

When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss. This information is provided for informative purposes only and should not be construed to be investment advice. Considering that share price movement affects the total market capitalization of companies listed in the index, the index level tends to fluctuate throughout the day when the market is open.

Is FTSE 100 just UK companies?

• Investing carries a level of risk that may not be suitable for all investors.
• Because they’re traded on the stock market, you may need to pay a dealing fee when you buy or sell an ETF.
• The value of your investments can go up and down, and you may get back less than you invest.
• The index tends to move higher on earnings report of the listed companies turning out positive.
• Remember that when you invest, profits aren’t guaranteed and you can lose money.

Technically, the FTSE 100 doesn’t have a ‘share price’ measured in currency. Its value is expressed as a number, representing the overall performance of its components, measured in points. For example, you would say that the Footsie has risen or fallen a certain amount of points in a day. The FTSE 100 is composed of a diverse range of companies from various sectors, representing the largest and most prominent companies listed on the London Stock Exchange. Understanding how the FTSE 100 price is calculated and having a historical perspective on its average values can provide valuable insights into the index’s performance over time.

• But despite two decades of research (estimated to cost around US$500 million), and creating a product they thought could be competitive in the US market, Tesco failed to take off, leaving the US in 2013.
• A weaker pound can inflate profits for FTSE 100 companies that generate revenue in foreign currencies, making the index perform better despite localized economic challenges.
• The launch of the Alternative Investment Market (AIM) provided smaller companies with access to capital, further diversifying the types of businesses listed on the exchange.
• So, when coming across references to Footsie 100, investors should rest assured that it’s simply another name for the FTSE 100.
• FTSE 100 companies are typically stable thanks to their size and reputation – but they’re not immune from downturns.
• That means, unlike other funds, you can buy or sell them at any time during the day rather than just once a day.

Understanding the FTSE 100 is crucial for navigating the complex world of investing for both seasoned investors and those just starting out. In this article, we’ll demystify the FTSE 100 index, explore its significance for all types of investors, dive into its fascinating history, and unravel how it actually works. The FTSE 100 serves as a barometer for the UK economy and investor confidence. It responds to political and economic events, making it a crucial indicator for analysts and policymakers.

The ‘Big Bang’ deregulation transformed the LSE by introducing electronic trading and ending the traditional open outcry system. ETFs pay out dividends quarterly, semi-annually, or annually, and the iShares Core FTSE 100 UCITS ETF and the Vanguard FTSE 100 UCITS ETF are known for regularly paying their shareholders dividends. So, for example, AstraZeneca’s dividend yield was 2.11% (January 2025), while in the same month, Shell’s dividend yield was 4.19%, and Rio Tinto’s was -7.18%. When all 100 companies’ dividend yields are combined — like those of AstraZeneca, Shell and Rio Tinto — the average equates to 3.52% (the dividend yield of the FTSE 100). A spectacular example of geographic revenue exposure was when UK supermarket giant Tesco’s launched into the US.

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To make your portfolio even more diverse, you could invest in a variety of funds and track indexes from around the world, including the Standard and Poor 500 (S&P 500) and Dow Jones Industrial Average (DJI). If you’re considering investing in the FTSE 100, you’ll likely want to keep track of its current value. Larger weightings mean a company has a greater influence on the overall FTSE 100 performance.

Your LISA must also be open at least 12 months before you can use your funds to buy a house. Brics, an acronym, is a bloc of 10 countries which collaborate on issues such as security, comprising Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Indonesia, Iran and the United Arab Emirates. Monday was the second and final day of a summit for the countries, hosted in Rio de Janeiro. Please bear with us as we address this and restore your personalized lists. For example, during the onset of the COVID-19 pandemic in early 2020, the FTSE 100 dropped by over 2,400 points in a single month, reflecting widespread economic uncertainty.

These companies span various industries, including finance, energy, healthcare, and consumer goods, making the FTSE 100 a strong indicator of the overall health and performance of the UK economy. For investors, the index serves as a critical measure of blue-chip stocks, offering potential opportunities for steady dividends and robust long-term growth. The FTSE 100 is an index consisting of the shares of the 100 biggest companies by market capitalisation on the London Stock Exchange (LSE). You can trade the index’s price movements, or buy, sell or short shares of the constituents of the index.

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In November 2007, the retailer opened the first of their 199 Fresh & Easy stores on America’s West Coast — the operation costing around US$1.5 billion. No, the FTSE index has nothing to do with feet, swanky socks, or wandering feet under a dinner table. It’s simply the shorthand way of saying ‘footsie’, which removes the effort of saying ‘ef-tee-ess-ee’ every time it’s mentioned. The FTSE 100 index is maintained by the FTSE Group, a wholly owned subsidiary of the London Stock Exchange. Originally, the FTSE 100 was a joint venture between the Financial Times and the London Stock Exchange.

How Companies Are Weighted in the FTSE 100

You can trade spread bets without paying any tax and offset CFD losses against profits. The FTSE 100 is the key indicator of the UK’s biggest publicly traded companies. Nicknamed the “Footsie”, this index serves as a crucial benchmark for both domestic and international investors. It does not take into account the personal financial situation of the reader. Tax treatment is dependent on individual circumstances that may change in the future, and this article does not constitute any form of tax advice. Before committing to any investment decision, an investor must consider their individual financial circumstances and reach out to an independent financial advisor if necessary.

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The Dow Jones Industrial Average is one of the oldest stock market indices containing 30 prominent US companies across multiple industries. Zaven has worked in several industries throughout his career, from aircraft factories to game development studios. He has been actively investing in the stock market for the better part of a decade, managing over $1 million across multiple portfolios.

If you’re forex trading strategies made easy with fx leaders forex strategies not sure which investments are right for you, please request advice, for example from our financial advisers. If you decide to invest, read our important investment notes first and remember that investments can go up and down in value, so you could get back less than you put in. Prosper is a self-taught financial analyst and investor with years of experience. Inspired by Benjamin Graham, he employs a value-investing school of thought throughout his analyses.

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Overall, while the FTSE 100 strives for accuracy and consistency in company eligibility, occasional anomalies or unintentional inclusions/exclusions can occur due to extraordinary events or market dynamics. For example, a company’s market capitalization may experience significant, sudden volatility, causing it to move in and out of the FTSE 100. Another way to invest in the FTSE 100 is to purchase individual shares in the listed companies via an online investment platform. You may also receive dividends, which you can either reinvest or use as income.