Also known as the Footsie, its full name is the Financial Times Stock Exchange 100 Index.
But what actually is it? It’s an index of the largest 100 UK companies listed on the London Stock Exchange. Many of these companies are well-known names such as BP, HSBC and Tesco, while others will probably be less familiar.
In this guide, we look at the different ways you can invest in the index and some alternatives to consider.
Perhaps the most direct way to invest in the FTSE 100 is to buy individual shares of FTSE 100 companies via a share dealing platform.
If the shares you buy go up in value, you’ll make a profit when you sell them. Shareholders also usually receive regular dividends, linked to the profits made by the company.
But remember, shares can go up and down in value, so you could get back less than you invest.
To increase your chances of making profits, consider investing in shares from multiple companies in different industries. This type of ’diversification’ can also spread your risk.
FTSE 100 companies are typically stable thanks to their size and reputation – but they’re not immune from downturns. So it’s always wise to spread your risk.
You can buy FTSE 100 shares using InvestDirect, our share deaing platform. Fees and eligibility criteria apply.
Another way to buy into the FTSE 100 is to invest in an index tracker fund. Tracker funds aim to track the performance of a particular index, such as the FTSE 100.
The benefit of these funds is that you’re not putting all your eggs in one basket. If some FTSE 100 companies perform badly, this could be offset by others in the fund performing better.
While index tracker funds usually have an ongoing charge, they’re typically low because they don’t cost much to run. There’s no fund manager being paid to research and select certain companies.
Investing in a tracker fund means you could save money in dealing fees. You’re only making 1 trade but getting exposure to lots of companies – as opposed to buying lots of individual shares and paying a dealing fee each time.
You could diversify by investing in the FTSE 250 (this tracks the medium to smaller sized publicly listed companies) – or by investing in funds which track European or US Indexes.
You can view a selection of index-tracking funds in our online fund platform, Global Investement Centre. Fees and eligibility criteria apply.
FTSE 100 exchange-traded funds (ETFs) offer a way of investing in a range of bonds or shares in a single package. As the name suggests, they're traded on the stock market. That means, unlike other funds, you can buy or sell them at any time during the day rather than just once a day.
When you buy and sell an ETF, you'll notice that it has 2 prices. The ‘ask’ price is the price you pay to buy the ETF. The ‘bid’ price is the price you get when you sell the ETF. The difference between the bid and the ask price is called the 'spread'.
ETFs are generally cheaper to run than regular funds, and so often come with a low ongoing fee. Because they’re traded on the stock market, you may need to pay a dealing fee when you buy or sell an ETF.
You can buy FTSE 100 ETFs using our InvestDirect share dealing platform. Fees and eligibility criteria apply.
If you’re investing in a FTSE 100 tracker fund the costs are relatively low, depending on the fund and platform you choose. You’ll typically pay:
If you invest in FTSE 100 shares or an ETF, you would usually pay:
Index trackers are ‘passive’ funds. They simply aim to track the performance of an index. They often do this by investing in all the companies that make up the index. The higher a company’s current market valuation, the larger its weighting in the fund.
The main benefit of tracker funds is they generally have low fees. The main drawback is you’re reliant on the performance of that index. So if there is a downturn in the index, the value of your investment would see a similar drop.
Managed funds are run by a professional fund manager. They pick investments from various sectors or regions with the aim of outperforming the market average. This requires expertise and ongoing research. That’s why the ongoing charges for managed funds are generally higher than those of index trackers.
One of the benefits of managed funds is they can give you more exposure to global markets through increased diversification. So, if the value of the FTSE were to drop, this could potentially be offset by other global investments held within the fund that are performing better.
If you’re new to investing, you might consider one of our global ready-made portfolios. Simply choose between our regular portfolios or our sustainable portfolios, then select the level of risk that’s right for you. Our investment experts will take care of the rest. As with all investments, fees and eligibility criteria apply.
