What is the FTSE 100 and how to invest in it?
Welcome to our blog post on “What is the FTSE 100 and how to invest in it”. The FTSE 100 is a stock market index that measures the performance of the top 100 companies listed on the London Stock Exchange. It is widely used as a barometer of the UK stock market and is closely watched by investors worldwide. If you’re interested in investing in the FTSE 100, this blog post is for you. We’ll cover everything you need to know about the index, including how it works, how to invest in it, and some tips for successful investing. So, let’s get started!
What is the FTSE 100?
The FTSE 100 (Financial Times Stock Exchange Index 100) represents the largest share index comprising the biggest 100 companies (by market capitalisation) – hence “100” in its abbreviation.
The total market value of these 100 biggest companies is determined by multiplying the share price by the number of shares the company has issued – although these are UK companies, many of the 100 within the FTSE index has an international focus, meaning it isn’t solely representative of the UK economy.
The index was conceived in 1984 and has since grown exponentially, with many new companies rising into it over the years due to their growing market capitalization. Many existing companies are now gone or no longer included within the index, replaced by other larger companies.
What Companies make up the FTSE 100
Below is a complete listing of all FTSE 100 companies, divided by the company name, its EPIC (Exchange Price Information Code), the industry or sector the company works within, and some additional information.
|Company||EPIC||Industry and More Info|
|Admiral Group||ADM||Non-life Insurance|
|Anglo American plc||AAL||Mining|
|Ashtead Group||AHT||Support Services|
|Associated British Foods||ABF||Food Producers|
|AstraZeneca||AZN||Pharmaceuticals & Biotechnology|
|Auto Trader Group||AUTO||Media|
|Aveva||AVV||Software & Computer Services|
|BAE Systems||BA||Aerospace & Defence|
|Barratt Developments||BDEV||Household Goods & Home Construction|
|Berkeley Group Holdings||BKG||Household Goods & Home Construction|
|BP||BP.||Oil & Gas Producers|
|British American Tobacco||BATS||Tobacco|
|British Land||BLND||Real Estate Investment Trusts|
|BT Group||BT-A||Fixed Line Telecommunications|
|Compass Group||CPG||Support Services|
|CRH plc||CRH||Construction & Materials|
|DCC plc||DCC||Support Services|
|Dechra Pharmaceuticals||DPH||Health Care|
|DS Smith||SMDS||General Industrials|
|Entain||ENT||Travel & Leisure|
|Flutter Entertainment||FLTR||Travel & Leisure|
|Foreign & Colonial Investment Trust||FCIT||Financial Services|
|GSK plc||GSK||Pharmaceuticals & Biotechnology|
|Haleon||HLN||Pharmaceuticals & Biotechnology|
|Halma plc||HLMA||Electronic & Electrical Equipment|
|Hargreaves Lansdown||HL||Financial Services|
|IHG Hotels & Resorts||IHG||Travel & Leisure|
|Intermediate Capital Group||ICP||Investment Services|
|International Airlines Group||IAG||Travel & Leisure|
|JD Sports||JD||General Retailers|
|Land Securities||LAND||Real Estate Investment Trusts|
|Legal & General||LGEN||Life Insurance|
|Lloyds Banking Group||LLOY||Banks|
|London Stock Exchange Group||LSEG||Financial Services|
|Melrose Industries||MRO||Automobiles & Parts|
|Mondi||MNDI||Forestry & Paper|
|National Grid plc||NG||Gas, Water & Multi-utilities|
|Next plc||NXT||General Retailers|
|Ocado Group||OCDO||Food & Drug Retailers|
|Pershing Square Holdings||PSH||Financial Services|
|Persimmon plc||PSN||Household Goods & Home Construction|
|Phoenix Group||PHNX||Life Insurance|
|Prudential plc||PRU||Life Insurance|
|Reckitt||RKT||Household Goods & Home Construction|
|Rentokil Initial||RTO||Support Services|
|Rolls-Royce Holdings||RR||Aerospace & Defence|
|RS Group plc||RS1||Industrials|
|Sage Group||SGE||Software & Computer Services|
|Sainsbury’s||SBRY||Food & Drug Retailers|
|Scottish Mortgage Investment Trust||SMT||Equity Investment Instruments|
|Segro||SGRO||Real Estate Investment Trusts|
|Severn Trent||SVT||Gas, Water & Multi-utilities|
|Shell plc||SHEL||Oil & Gas Producers|
|Smith & Nephew||SN||Health Care Equipment & Services|
|Smiths Group||SMIN||General Industrials|
|Smurfit Kappa||SKG||General Industrials|
|Spirax-Sarco Engineering||SPX||Industrial Engineering|
|St. James’s Place plc||STJ||Financial Services|
|Taylor Wimpey||TW||Household Goods & Home Construction|
|Tesco||TSCO||Food & Drug Retailers|
|Unite Group||UTG||Real Estate|
|United Utilities||UU||Gas, Water & Multi-utilities|
|Vodafone Group||VOD||Mobile Telecommunications|
How do Companies get into the FTSE 100?
Each of these listed companies in the table above is currently part of the FTSE 100 – but how does a company become part of the largest share index?
A company must achieve several requirements before it can be listed on the FTSE 100 – these requirements are set by the FTSE Group, which is a subsidiary and provider of the stock market indices. In turn, they are owned by the London Stock Exchange.
To be listed, a company must:
- Already be listed on the London Stock Exchange (LSE) – with a price denomination of Euro or Sterling.
- Meet certain requirements covering liquidity and free float shares available.
- They must also report their Quarterly financial results to determine if a company has market capitalisation within a certain industry or sector that accords with other FTSE 100 listings.
How can I invest in the FTSE 100?
There are numerous platforms and methods available to how you can invest in the FTSE 100. Listed below are the core examples of ways in which you can compare the fund or funds you wish to invest in – and the method of investment you wish to choose:
Buying shares individually – Through various trading platforms that have increased in accessibility over the years, you are able to buy individual shares in a certain company of your choice. However, this method requires the most oversight and personal responsibility when it comes to managing your investment – it would require knowledge of the stock market and time invested into your own research.
Investment Trusts – Investment trusts are often run by limited companies, who make their business through investing shareholders’ funds or funds acquired through investors in their limited company – they aim to diversify a portfolio on the behalf of shareholders. The shares in these trusts are bought and traded like any other public company on the stock exchange.
ETFs – Like investment trusts, ETFs (Exchange-traded funds) are traded on a stock exchange, often tracking a particular index, such as the FTSE 100 or S&P 500. Investors increasingly prefer ETFs because of their low costs and stability. When you invest in an ETF you are investing in a diversified selection across UK industry from a variety of sectors – the stability comes through this diversification by not having all your investments tied to a single sector or industry, or specific company.
Investment Funds – Investment funds are simply a broad selection of stocks in the FTSE 100 or S&P 500. They are funds that allow for diversification, lower cost and proper management of said fund that may be unavailable to the sole investor. Investment funds comprise three categories; the already explained ETFs, open-ended, and closed-ended funds. A selection of FTSE 100 tracker funds can be found here.
Structured Products – We offer a number of structured investment products; here, you can view and compare our current offers. The investment plans featured on this site have defined investment terms where the investment objectives and risks are clearly outlined in the plan literature available on request.
Choosing an investment platform
If you have decided on a specific fund or funds you wish to invest in, then the next step would be to choose a fund platform – the advantage of a platform is that it gives you flexibility in managing your investments which you don’t get if you invest directly with one fund manager.
You can buy funds online, usually at a discount. As well as having a direct account, you can hold the fund in a tax-free wrapper such as an ISA or a SIPP in many accessible trading platforms available.
With trading platforms online, you get:
- Easy access to the stock market
- readymade portfolios/funds to help you choose
- And you all your ISAs, Junior ISAsand pensions (SIPPs) are all in one place
Most of the available platforms will provide useful research tools and ways to assess the performance of investment funds you might be considering investing in.
What is the best FTSE 100 Fund?
If you’re looking for investment funds in the FTSE 100, then it would be best to do some research. Having a keen understanding of the stock market is not essential, but without it comes a greater level of risk.
When you plan to invest in a fund, you want to look into the diversification of that specific fund – how broadly it may be spread between industries and sectors.
Ultimately, with ETFs or investment funds, you would be planning long-term investments as the returns (if you have invested wisely) will achieve greater yields on a yearly basis – anywhere from 1 to 5 years of investment or longer.
It is also important to consider that, depending on the platform you are using or the “wrapper” in which you are investing – be that an ISA or SIPP – there may be Ongoing Charges (OCF) while you hold an investment in any particular FTSE 100 Fund or multiple funds.
Below you can find a table listing some of the more popular FTSE 100 funds:
What has been the past performance of the FTSE 100?
The FTSE 100 has performed well, rising exponentially since its conception – yet, this is a narrow view of performance when you have not considered the many changes over the years.
It is important to note that looking at the past performance of any index or an individual stock, in general, is not a great guide for the future movements of that stock – meaning, you should not base your investments on past performance alone.
Over the long years, the FTSE 100 has evolved. From its conception, it was UK-orientated and did not comprise heavily of global companies that generate revenue through different currencies or massive overseas sales rather than at home.
The FTSE 100 is comprised of companies now that make their revenue in something other than sterling; when factoring in the currency exchange, this can lead to unpredictable swings for the FTSE 100 index and, moreover, its reliability as a marker for the UK economy overall.
The FTSE 100 is less representative of the UK’s economic situation as the index has shifted towards a more global and international focus that differs from its earlier conception and listings from 1984 onwards.
For a more robust UK-centric investment, you may look instead towards the FTSE 250, which encompasses a wider variety of UK stocks and better reflects the UK economy. For instance, the companies listed on the 250 generate a larger portion of their revenues in the UK than aboard.
An important consideration is a way in which the FTSE 100 is weighted towards certain industries or commodities – meaning, if investing in the FTSE 100, you may not want to invest elsewhere. If another index, or grouping of stocks, has a heavier weight towards a similar industry, you may end up with a narrow portfolio, leaving your money unprotected against unpredictable downturns within certain sectors of the industry.
Ultimately, wise investment often means building a diversified and balanced portfolio, and the FTSE 100 may be too narrow an investment as it stands today – at least as a sole investment.