What exactly is the FTSE 100, and how can you trade it?
What exactly is the FTSE 100, and how can you trade it?

The Financial Times Stock Exchange 100 Index, usually known as the FTSE 100, is a stock market index that tracks the performance of the top 100 businesses listed on the London Stock Exchange (LSE).

The FTSE 100 has been in existence since 1984 and is one of the world’s most well-known stock market indices. The FTSE 100 may be used as a tool for active investors who want to trade equities in the index in addition to serving as a benchmark. ​

We’ll look at what makes up the FTSE 100 and how it’s determined in this post. We’ll also go over some of the elements that might impact its price swings, as well as the many methods you can get started. Before we get into how to trade indexes like the FTSE 100, let’s take a look at what it symbolizes and which firms are included in it.

What exactly is the FTSE 100?

The FTSE 100 index is comprised of the 100 biggest firms by market capitalization listed on the London Stock Exchange (LSE). The index was established on January 3rd, 1984, with a value of 1000 points.

The FTSE Group (trading as FTSE Russell) is a subsidiary of the London Stock Exchange (LSE) Group that maintains the index.

While the FTSE 100 is a popular and well watched index, it is a poor predictor of how the UK economy is doing because the majority of its components are multinational firms with a global emphasis. Investors looking to obtain a better understanding of the UK economy may pick the FTSE 250 or FTSE SmallCap Index.

How is the FTSE 100 determined?

The FTSE 100 is an arithmetic weighted index based on the free-float market capitalization of its participants. This means that variations in the share prices of larger firms will have a higher influence on the value of the FTSE 100 than fluctuations in the share prices of smaller companies.

Why Are FTSE 100 Stocks Still Potentially Undervalued? | CMC Markets

What are the trading hours for the FTSE 100?

The London Stock Exchange is open from 8 a.m. to 12 p.m. on weekdays and from 12:02 p.m. to 4:30 p.m. on weekends (London Time).

The UK100 (Cash CFD) is available for trading from 11 p.m. Sunday to 09:59 p.m. Friday, with daily trading pauses of 9:15-9:30 p.m. and 9:59-11 p.m. (London Time).

The FT100.fs (Futures CFD) is available for trading between 1 AM Monday and 8:59 PM Friday, with a daily trading break between 8:59 PM and 1 AM.

What industries are represented in the FTSE 100?

Materials is the biggest sector in the FTSE 100, accounting for about 20% of the index. This is followed by Financials at 17% and Consumer Staples at 16%. Energy and industrials rank in second and third, with 12.4 percent and 8.7 percent, respectively. The score includes significant weights for health care, consumer discretionary, and communication services.

FTSE 100 sectors pie chart

What are the top ten FTSE 100 companies?

The top ten corporations in the FTSE 100 index are as follows:

  1. AstraZeneca
  2. Unilever
  3. Diageo
  4. HSBC
  5. GlaxoSmithKline
  6. Royal Dutch Shell
  7. BP (British Petroleum)
  8. Rio Tinto
  9. British American Tobacco
  10. Glencore

The FTSE 100’s share price

The FTSE 100 is stabilizing at 7170 points as of December 6th. The FTSE 100, like all other market indexes, will plummet in March 2020 as a result of the pandemic. Since then, the index has been slowly rebounding, albeit it has yet to regain its pre-pandemic peak, while the US and the majority of its European rivals have set new records.

In 1984, the FTSE 100 began at 1000 points. In May 2018, the index achieved an all-time high of 7903 points.

Share price of UK100

How do I trade it?

Contracts for Difference (CFDs) are one way to trade the FTSE 100 in a cost-effective and efficient manner. Brokers often provide a CFD based on the Cash Index (UK100) as well as a CFD based on the underlying Futures contract (FTSE100.fs).

When you trade indices online using CFDs, you may speculate on the underlying instrument’s (the FTSE 100) direction without owning it or any of its members. You will be able to travel both long and short with the use of leverage.

This is especially important during a recession. Most investors want to avoid portfolio reshuffling since the fees may quickly build up and it is extremely difficult to predict the market accurately. As a result, instead of selling a substantial portion of your portfolio when a downturn is expected, you might utilize CFDs to bet on declining prices.

The Cash CFD (UK100) or Futures CFD (FTSE100.fs) will be more appropriate for you depending on your trading style. If you only want to hold positions for a limited amount of time, the UK100 may be preferable due to its modest spreads. However, if you are a long-term trader, you may choose the FTSE100.fs because there are no swap charges.

How can I invest in the FTSE 100?

ETFs (Exchange Traded Funds) are the most convenient method to invest in the FTSE 100 index. It is less expensive than purchasing individual shares, and it is rebalanced quarterly.

While ETFs can also be leveraged, they often provide less flexibility than trading CFDs. However, if you are a long-term investor who does not want to actively trade the product, the ETF may be an economical alternative.

There are several ETFs available from various suppliers. When selecting an ETF, you should read the factsheet given by your broker and become acquainted with the product’s features as well as the fees associated.

The largest FTSE 100 ETFs are (by AUM) are:

  • iShares Core FTSE 100 UCITS ETF (Dist)
  • Vanguard FTSE 100 UCITS ETF (Dist)
  • iShares Core FTSE 100 UCITS ETF GBP (Acc)

The cheapest FTSE 100 ETFs (by TER – Total Expense Ratio) are:

  • iShares Core FTSE 100 UCITS ETF (Dist)
  • iShares Core FTSE 100 UCITS ETF GBP (Acc)

What causes the rise?

FTSE 100 cements triple-digit gain as Wall Street surges higher

The FTSE 100 is influenced by a number factors, the most important of which are given below:

Economic data – While international economic data has the ability to impact the FTSE 100, the index will be influenced mostly by domestic data. Depending on the nature of the data, some firms will be impacted more than others, while others would be impacted less or not at all. Rising interest rates, for example, would almost certainly influence the share price of financial services businesses.

Economic events – Political events, such as the United Kingdom’s withdrawal from the European Union, can have a big influence on the local stock market. Trade transactions, international ties, and geopolitical developments may all have an impact on the it.

Earnings reports – Earnings and predictions provided by FTSE 100 participants can have a significant influence on the index’s value, depending on the weight of the specific stock. Earnings numbers from AstraZeneca, for example, will have a significantly greater influence than earnings from a component with a lower weight in the index.

Commodity pricing – Because commodity trade and mining businesses account for more than 10% of the FTSE, variations in commodity prices can have an influence on the index.

Exchange rates – Since the Brexit referendum, the British Pound has witnessed increasing volatility, which can affect the FTSE 100. Because a considerable number of constituents sell to foreign nations, a lower Pound is excellent news for UK exporters.

What is the average return?

Over the last five years, it has returned 4.8 percent on an annualized basis. The FTSE 250 and FTSE SmallCap have outperformed the FTSE 100, but investors should keep in mind that both indices have more volatility.

What does the FTSE 100’s performance tell us?

When compared to some of its foreign contemporaries, such as the Dow Jones in the United States or the DAX in Germany, the performance of the FTSE 100 is far from outstanding. Brexit and the COVID-19 epidemic are undoubtedly two big factors weighing on the FTSE 100’s performance.

However, the FTSE 100 heavyweights include significant corporations from conventional industries such as pharmaceuticals, finance, mining, and oil and gas. There are very few IT businesses that could have compensated for the poor performance of key industries, such as finance and oil and gas.

While the FTSE 100 is pretty steady and its components pay out excellent dividends, investors seeking exposure to the UK stock market should also examine the FTSE 250 and the FTSE Small Cap.

List of FTSE 100 companies

Ticker Company Name
ADM Admiral Group
AAL Anglo American
ANTO Antofagasta Holdings
AHT Ashtead Group plc
ABF Associated British Foods plc
AZN AstraZeneca plc
AUTO Auto Trader Group plc
AVV AVEVA Group plc
AV. Aviva plc
BA. BAE Systems plc
BARC Barclays plc
BDEV Barratt Developments plc
BKG Berkeley Group Holdings plc
BHP BHP Group Plc
BP. BP Plc
BATS British American Tobacco plc
BLND British Land Co plc
BT.A BT Group plc
BNZL Bunzl plc
BRBY Burberry Group plc
CCL Carnival plc
CNA Centrica plc
CCH Coca-Cola HBC AG
CPG Compass Group plc
CRDA Croda International plc
DGE Diageo plc
EVR Evraz plc
EXPN Experian Plc
FERG Ferguson plc
FLTR Flutter Entertainment
FRES Fresnillo
GSK GlaxoSmithKline plc
GLEN Glencore plc
HLMA Halma plc
HL. Hargreaves Lansdown plc
HIK Hikma Pharmaceuticals
HSX Hiscox Ltd
HSBA HSBC Holdings plc
IMB Imperial Brands Group
INF Informa plc
IHG InterContinental Hotels Group plc
IAG International Consolidated Airlines Group SA
ITRK Intertek Group plc
JD. JD Sports Fashion plc
JMAT Johnson Matthey Plc
KGF Kingfisher
LAND Land Securities Group plc
LGEN Legal & General Group plc
LLOY Lloyds Banking Group plc
LSE London Stock Exchange Group plc
MNG M&G plc
MGGT Meggitt
MRO Melrose Industries plc
MNDI Mondi Plc
MRW Morrison (Wm) Supermarkets
NG. National Grid
NXT Next plc
NMC NMC Health Plc
OCDO Ocado Group plc
PSON Pearson plc
PSN Persimmon plc
PHNX Phoenix Group Holdings Plc
POLY Polymetal International plc
PRU Prudential plc
RB. Reckitt Benckiser Group Plc
RTO Rentokil Initial Plc
RMV Rightmove plc
RIO Rio Tinto plc
RR. Rolls Royce Holdings Plc
RBS Royal Bank of Scotland Group plc
RDSa Royal Dutch Shell Plc A Shares
RDSb Royal Dutch Shell Plc B Shares
RSA RSA Insurance Group
SGE Sage Group plc
SBRY Sainsbury (J) plc
SDR Schroders plc
SMT Scottish Mortgage Investment Trust
SGRO Segro Plc
SVT Severn Trent Plc
SN. Smith & Nephew plc
SMDS Smith (DS)
SMIN Smiths Group Plc
SKG Smurfit Kappa Group Plc
SPX Spirax-Sarco Engineering plc
STJ St James’s Place Plc
STAN Standard Chartered plc
SLA Standard Life Aberdeen Plc
TW. Taylor Wimpey plc
TSCO Tesco plc
ULVR Unilever plc
UU. United Utilities Group Plc
VOD Vodafone Group plc
WTB Whitbread plc

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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71.58% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.