It represents the top 100 companies by market capitalization (overall value) in the UK, encompassing a wide range of sectors such as finance, energy, consumer goods, and more. The FTSE (pronounced “footsie”) refers to the FTSE Russell Group, owned by the  London Stock Exchange Group (LSEG), which designs and manages global stock indexes. Its flagship index, the FTSE 100, tracks the performance of the 100 largest companies listed on the London Stock Exchange and serves as a key indicator of the U.K. The FTSE 100 is an index composed daily trading coach of the 100 largest (by market capitalisation ) companies listed on the London Stock Exchange (LSE). These are often referred to as ‘blue chip’ companies, and the index is seen as a good indication of the performance of major companies listed in the UK, although many of them make much of their money overseas.

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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). 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. The U.S. version of this would be the S&P 500, which tracks the top 500 U.S. companies by market cap, or the Dow Jones Industrial Average (DJIA), which tracks 30 prominent U.S. companies. Similar to Standard & Poor’s in the U.S., the FTSE provides benchmarks that help investors assess and compare market segment performance worldwide.

• A FTSE 100 company simply refers to a publicly listed company that is part of the Financial Times Stock Exchange 100 Index, commonly known as the FTSE 100.
• ‘FTSE’ is short for ‘Financial Times Stock Exchange’, which is derived from the names of two companies that launched the FTSE – ‘Financial Times’ and ‘London Stock Exchange’.
• The recalibration ensures that the index accurately reflects the changing market dynamics and the relative importance of the constituent companies.
• The 100 companies with the highest market cap are included in the index.

Today, it serves as the primary benchmark for the performance of large-cap UK companies. IG International Limited is part of the IG Group and its ultimate parent company is IG Group Holdings Plc. IG International Limited receives services from other members of the IG Group including IG Markets Limited. IG Group established in London in 1974, and is a constituent of the FTSE 250 index. Find out more about a range of markets and test yourself with IG Academy’s online courses. Some of the top FTSE 100 constituents include Royal Dutch Shell, GlaxoSmithKline, Unilever and Barclays.

• To protect your profits from the taxman, you can make the most of your annual ISA allowance, which currently stands at £20,000.
• The calculation involves multiplying the share price of each company by its total number of shares outstanding, resulting in the market value of each company.
• Being included in the FTSE 100 is a prestigious achievement, indicating a company’s size, significance, and market influence.
• With its 100 largest constituent companies, it reflects the performance of major players across various sectors.
• Today, it serves as the primary benchmark for the performance of large-cap UK companies.

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The free float adjustment is an important part of how the FTSE 100 is calculated. It ensures that only the shares available for public trading are considered when calculating market capitalization, rather than shares held by insiders, governments, or other entities. This adjustment reflects the shares that investors can actively buy and sell in the market, ensuring that the index is an accurate representation of the investable portion of each company.

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The price of the index is then determined by changes to the individual stocks. Stocks with higher market capitalisation have more weight in the FTSE 100, meaning their performance has a bigger effect on the index’s price movements. Each company’s market capitalisation is reassessed every quarter and the index is adjusted if necessary.

It consists of the 100 largest companies listed on the London Stock Exchange (LSE) based on their market capitalization. As such, it plays a crucial role in representing the economic status of the UK and provides valuable insights into the performance of major UK companies. As a popular (if not the most precise) measure of the UK stock market’s overall health and investor sentiment, the FTSE 100 provides valuable insights into the country’s economic landscape.

Investors can purchase exchange-traded funds (ETFs) or mutual funds that track the performance of the FTSE 100 index. The FTSE 100 index is a capitalization-weighted index, which means that companies with larger market capitalizations have a greater influence on the index’s movements. As a result, changes in the share prices of larger companies will have a bigger impact on the overall index value compared to smaller companies. The FTSE 100 is an index made up of shares from the 100 biggest companies by market capitalisation on the London Stock Exchange (LSE).

Impact on the UK Pound

It was launched in January 1984, replacing an index called the FT30, which was the main guide for the performance of companies listed on London Stock Exchange (LSE) at the time. 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 FTSE Group closely monitors the eligibility of companies and reviews the index composition regularly to maintain accuracy.

This index serves as a vital tool for investors to gauge market trends, make informed decisions, and track the performance of major UK-listed companies. Many mutual funds, exchange-traded funds (ETFs), and index funds track the FTSE 100, allowing investors to gain exposure to the largest UK companies without having to buy individual stocks. These investment vehicles offer a way for both institutional and retail investors to diversify their portfolios while maintaining a focus on the UK market. The creation of the FTSE 100 was a collaborative effort between the Financial Times (FT) and the London Stock Exchange (SE), hence the name. The selection process involved identifying the top 100 companies by market capitalization and ensuring that the index offered a diverse representation of various sectors and industries. (Further information on company eligibility can be found later in this article).

What is the FTSE 100: FTSE 100 analysis for European investors

The 100 largest companies on the London Stock Exchange by market capitalization are included. The value of your investments, and the income derived from them, may go down as well as up. If in doubt, please seek advice from a qualified investment adviser. We do not provide investment advice or solicitation of any kind to buy or sell any investment products.

Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, administrative costs, withholding taxes and different accounting and reporting standards. They may have other tax implications, and may not provide the same, or any, regulatory protection. Exchange rate charges may adversely affect the value of shares in sterling terms, and you could lose money in sterling even if the stock price rises in the currency of origin. Any performance statistics that do not adjust for exchange rate changes are likely to result in an inaccurate portrayal of real returns for sterling-based investors. The FTSE 100 evaluates all stocks listed on the London Stock Exchange by market capitalisation (sometimes called “market cap”). The 100 companies with the highest market cap are included in the index.

The level of the FTSE 100 affects most people in the UK even if they don’t directly invest for themselves. That’s because most of us are pension fund holders, whose investments are probably invested in UK equities, so how well the index is performing directly affects the return we will receive. IG International Limited is licensed to conduct investment business and digital asset business by the Bermuda Monetary Authority. ‘FTSE’ is short for ‘Financial Times Stock Exchange’, which is derived from the names of two companies that launched the FTSE – ‘Financial Times’ and ‘London Stock Exchange’.

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Other UK indices include the FTSE 250, FTSE 350, FTSE SmallCap and FTSE All-Share. FTSE also has three indices for AIM stocks – smaller, growing companies owned by the London Stock Exchange. The performance of the FTSE 100 can also affect the value of the British pound (GBP). A strong-performing FTSE 100 often coincides with a strong pound, as foreign investors may purchase more UK assets.