FTSE 100 Index: What is it and How To Trade in It?

FTSE 100 Index: What is it and How To Trade in It?

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Jaya
Jaya Sharma
Assistant Manager - Content
Updated on Jan 31, 2024 19:16 IST

FTSE 100 index is a share index that lists 100 companies on the London Stock Exchange by full market value. The FTSE group maintains this index.

all about ftse index

Table of Contents

What is FTSE 100 Index?

FTSE 100 index is a market-capitalization weighted index for the UK-listed blue chip companies. It is managed by the FTSE group. There are other popular indexes within the group including FTSE 250,  FTSE 350 and FTSE All-share. All these indexes have index fund offerings in Vanguard FTSE 100, Vanguard FTSE 250, iShares 350 U.K. Equity Index Fund and the Vanguard FTSE UK All Share Index Unit Trust.

This market capitalization-weighted index replaced the price-weighted FT30 index. It is the performance benchmark for investors and is the most widely used US stock market indicator. Most investors in the FTSE 100 index explore opportunities for the big U.K. companies. A company must be listed on the London Stock Exchange in order to be included in this index. It must be denominated in Euro or sterling. It should also meet tests on nationality, free float and stock liquidity requirements.

FTSE Index at a Glance

Parameters Data
Constituent Quantity  100
Net MCap (GBPm) 1,781,113
Dividend Yield 3.91%
Weight of the largest FTSE constituent  9.22%
MCap of the Top 10 Holdings  51.19%

Index Constituents

All FTSE 100 constituents are traded on the SETS trading system of the London Stock Exchange. These FTSE index constituents are reviewed every quarter during which some companies enter and exit the index. This impacts the share prices. The following companies are the part of FTSE 100 index:

Company
3i
Abrdn
Admiral Group
Airtel Africa
Anglo American plc
Antofagasta
Ashtead Group
Associated British Foods
AstraZeneca
Auto Trader Group
Avast
Aveva
Aviva
B&M
BAE Systems
Barclays
Barratt Developments
Berkeley Group Holdings
BP
British American Tobacco
British Land
BT Group
Bunzl
Burberry
Coca-Cola HBC
Compass Group
CRH plc
Croda International
DCC plc
Dechra Pharmaceuticals
Diageo
Electrocomponents
Entain
Evraz
Experian
Ferguson plc
Flutter Entertainment
Fresnillo
GlaxoSmithKline
Glencore
Halma
Hargreaves Lansdown
Hikma Pharmaceuticals
HSBC
IHG Hotels & Resorts
Imperial Brands
Informa
Intermediate Capital Group
International Airlines Group
Intertek
ITV plc
JD Sports
Kingfisher
Land Securities
Legal & General
Lloyds Banking Group
London Stock Exchange Group
M&G
Meggitt
Melrose Industries
Mondi
National Grid plc
NatWest Group
Next plc
Ocado Group
Pearson plc
Pershing Square Holdings
Persimmon plc
Phoenix Group
Polymetal International
Prudential plc
Reckitt
RELX
Rentokil Initial
Rightmove
Rio Tinto
Rolls-Royce Holdings
Royal Mail
Sage Group
Sainsbury’s
Schroders
Scottish Mortgage Investment Trust
Segro
Severn Trent
Shell
DS Smith
Smiths Group
Smith & Nephew
Smurfit Kappa
Spirax-Sarco Engineering
SSE plc
Standard Chartered
St. James’s Place plc
Taylor Wimpey
Tesco
Unilever
United Utilities
Vodafone Group
Whitbread
WPP plc

Top 5 FTSE Constituents

As on September 2022, the following are the top 5 FTSE index constituents:

Constituent Sector
Shell SHEL Oil, Gas and Coal
Aviva AV. Insurance
Standard Chartered Banking
Prudential  Banking
Diageo Beverages

Returns on FTSE 100 Index Constituents

2022_10_total-returns-ftse-index.jpg

FTSE 100 Index Calculation

The FTSE 100 level is calculated through the total market capitalization of constituent companies and the index value. The total market capitalization and individual share prices of the indexed companies change throughout the trading day. As a result, the index value also changes. 

When the FTSE 100 is either quoted up or down, it is measured against the close of the previous day’s market. It is calculated in real-time and is published every second when the market is open, it is continuously calculated on each trading day. The timing is from 8:00 a.m. (market opening) to 4:30 p.m. (LSE close). A decline in the index means that the value of the largest listed UK companies has decreased. When the index hits a new high, it indicates that the total worth of all indexed companies has increased.

Readjustments in the index constituents (companies in the FTSE 100) occur every quarter. Most of the time, this happens on the Wednesday following the first Friday of March, June, September, and December. Any change in the underlying index constituents and weighting comes from companies’ value taken at the closing of business. This happens the night before the review.

Weighting

Share prices are weighted through free-float capitalization in FTSE indices. Since the larger companies have more stock “floating”, they can make a significant difference to the index. The formula for these indices is:

Here, the free float adjustment factor indicates the percentage of issued shares that are available for trading. It is rounded up to the nearest multiple of 5%. The free-float capitalisation of the company is equal to the market capitalisation multiplied by the free-float adjustment factor. It does not include restricted stocks.

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All About FTSE 100 Trading

Trading in FTSE 100 is possible with derivatives such as spread bets and CFDs. These allow price movements speculation without owning underlying assets. Both products are leveraged. You will get full exposure with a small deposit called margin. With leverage, there is a fair possibility of both losses and profits that can outweigh your deposit. The reason behind this possibility is that these are calculated on the position’s full size and not its margin. You can trade spread bets without the need of paying any tax. You can offset CFD losses against profits. With CFDs and spread bets, you gain access to cash indices and index futures.

How to buy a FTSE stock?

You do not have the option to directly invest in FTSE 100. Instead, you have the option to invest in an ETF or index fund. This tracks the stock performance in the FTSE 100 index.

Returns on FTSE

Returns depend on the factors impacting individual companies and industries on the index. This ultimately impacts the index price. Following are the annual returns since 1969:

Year Level of Closing Change In Index (in points) Change In Index (in %)
1969 313.16 _ _
1970 289.61 −23.55 −7.52
1971 411.03 121.42 41.93
1972 463.72 52.69 12.82
1973 318.30 −145.42 −31.36
1974 142.17 −176.13 −55.33
1975 335.98 193.81 136.32
1976 322.98 −13.00 −3.87
1977 455.96 132.98 41.17
1978 468.06 12.10 2.65
1979 488.40 20.34 4.35
1980 620.60 132.20 27.07
1981 665.50 44.90 7.23
1982 812.37 146.87 22.07
1983 1,000.00 187.63 23.10
1984 1,232.20 232.20 23.22
1985 1,412.60 180.40 14.64
1986 1,679.00 266.40 18.86
1987 1,712.70 33.70 2.01
1988 1,793.10 80.40 4.69
1989 2,422.70 629.60 35.11
1990 2,143.50 −279.20 −11.52
1991 2,493.10 349.60 16.31
1992 2,846.50 353.40 14.18
1993 3,418.40 571.90 20.09
1994 3,065.50 −352.90 −10.32
1995 3,689.30 623.80 20.35
1996 4,118.50 429.20 11.63
1997 5,135.50 1,017.00 24.69
1998 5,882.60 747.10 14.55
1999 6,930.20 1,047.60 17.81
2000 6,222.46 −707.74 −10.21
2001 5,217.35 −1,005.11 −16.15
2002 3,940.36 −1,276.99 −24.48
2003 4,476.87 536.49 13.62
2004 4,814.30 337.57 7.54
2005 5,618.76 804.46 16.71
2006 6,220.81 602.05 10.71
2007 6,456.91 236.10 3.80
2008 4,434.17 −2,022.74 −31.33
2009 5,412.88 978.71 22.07
2010 5,899.94 487.06 9.00
2011 5,572.28 −327.66 −5.55
2012 5,897.81 325.53 5.84
2013 6,749.09 851.29 14.43
2014 6,566.09 −183.00 −2.71
2015 6,274.05 −292.04 −4.45
2016 7,142.83 868.78 13.85
2017 7,687.77 544.94 7.63
2018 6,728.13 −959.64 −12.48
2019 7,542.44 814.31 12.10
2020 6,460.52 −1,081.92 −14.34
2021 7,384.54 924.02 14.30
About the Author
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Jaya Sharma
Assistant Manager - Content

Jaya is a writer with an experience of over 5 years in content creation and marketing. Her writing style is versatile since she likes to write as per the requirement of the domain. She has worked on Technology, Fina... Read Full Bio