The UK stock market has been a great place to invest in recent years. However, with a number of economic and political problems facing the country, investors may be looking for a better investment opportunity elsewhere.
The FTSE 100 is a good place to look for stocks with potential for growth. Investors can also look for companies that are resistant to the impact of inflation.
The FTSE 100 is one of the most popular indices in the UK, with many investors looking for exposure to ‘blue chip’ companies. It’s made up of the 100 largest (by market capitalisation) companies listed on the London Stock Exchange.
The index is managed by FTSE Group, which is a subsidiary of the LSE Group, and each company receives a weighting based on its market value. This ensures that each company can have a proportional influence on the value of the index.
Generally, the top performers in the index are in sectors that are resiliant to changes in economic growth and have long-term demand drivers, like oil and mining. The biggest names in the FTSE 100 include Shell and BP in oil, Anglo American and Rio Tinto in mining and HSBC and Barclays in banking.
These industries have all reaped the benefits of higher oil prices and high commodity prices in recent years. But they are not immune to a fall in the economy or a decline in interest rates, meaning their performance may be affected by these factors as well.
The FTSE 250 is a collection of UK-listed companies ordered by market capitalisation. It is typically more volatile than its FTSE 100 cousin and is a popular index for investors seeking to put their faith in smaller, growing companies.
The FTSE 100 is the most widely known index and includes the top 100 companies listed on the London Stock Exchange, ordered by market capitalisation. It is more concentrated with a higher concentration of high-market cap stocks than the FTSE 250.
As a result, it can be more difficult for companies in the FTSE 100 to grow their businesses compared to those in the FTSE 250. This is because the FTSE 100 is made up of large-cap companies with already achieved considerable success, making them less likely to have the potential for future growth than smaller companies in the FTSE 250.
FTSE Small Cap
The FTSE Small Cap index is a market capitalisation (market value) index that consists of companies that are not large enough to be included in the FTSE All-Share. It includes the 351st to 619th largest publicly traded companies on the London Stock Exchange main market.
This range is much smaller than the FTSE 100 and FTSE 250 which are also listed on the UK’s main stock market, but it is still an important part of the UK stock market.
Small-cap stocks generally represent younger and potentially faster growing companies with the potential to create substantial gains over time. However, they can be riskier than larger, more established and already profitable businesses.
Despite this, the average performance of small caps has been higher than global large caps over several decades. This has been true even when market sentiment is at its weakest.
The FTSE All-Share is a reputable stock index that consists of 600 of the UK’s most popular blue-chip stocks. It has been around for decades and captures around 98% of the London Stock Exchange’s market capitalisation.
To qualify for inclusion in the FTSE All-Share, securities must meet requirements for price, size and liquidity. These criteria are set in place to ensure that the index remains a reliable gauge of overall market performance.
It also includes the FTSE Small Cap – a collection of companies that are not large enough to qualify for the FTSE 350 but have an investable market cap of GBP 30 million or less. They are added to the index at quarterly reviews.
The FTSE All-Share also offers a range of index fund products that track its performance. They use a technique called “partial replication”, holding all of the shares in the FTSE 100 and FTSE 250 excluding investment companies, but only a representative sample of the smaller stocks. This is a cost-effective method for tracking the performance of the FTSE All-Share and allows you to avoid the counterparty risk associated with products that use derivatives.