August 27, 2020 Update: The FTSE 100 Index fell back below 6,000 today following Federal Reserve Chairman Jerome Powell’s speech at Jackson Hole. European stock indices didn’t pay much attention to Powell’s speech, which signaled easier monetary policy in the near future.
This post is updated regularly with the latest on the FTSE 100 Index. Check back for all the latest news on the U.K. market and the index.
Powell’s new policy is based on average inflation targeting, and his announcement was as expected. U.S. stocks surged after his speech despite weak economic data that revealed first-time jobless claims remained above 1 million.
Meanwhile, the FTSE 100 remained lackluster, initially flipping into the green after the Fed chairman’s Jackson Hole speech but then moving back into the red before the market closed for the day.
FTSE 100 Index: What is it and how can you invest?
Whenever we read or talk about international stock markets, the name ‘footsie’ or FTSE 100 index (INDEXFTSE:UKX) pops up again and again. It’s an index is managed by the Financial Times Stock Exchange (FTSE) Group, which is a subsidiary of the London Stock Exchange Group. The FTSE 100 index was created in January 1984 with a base value of 1,000 points. As of April 24, the index is at 5808.08, meaning its constituents have grown nearly six times in valuation.
What is ‘footsie’?
The ‘footsie’ is one of the largest and most popular stock indices in Europe. It consists of 100 of the largest companies by market capitalization listed on the London Stock Exchange (LSE). It’s a market-cap weighted index. So, companies with a higher free float market capitalization have a greater weightage in the index.
The index represents about 80% of the total market cap of the London Stock Exchange, which is one of the world’s largest stock exchanges. It includes large companies based in the UK as well as many others headquartered outside the country.
Many see the FTSE 100 index as a barometer of the UK’s economic health. But it’s not a reliable indicator because it also comprises many international stocks. A more accurate barometer would be the FTSE 250 index because it has only a small number of international stocks.
The index value is calculated in real time and is published every 15 seconds. The FTSE Group adds or removes constituents in the index once every quarter depending on their market capitalization, liquidity, and other factors. The readjustments typically take place on the Wednesday following the first Friday in March, June, September, and December.
How to invest in the FTSE 100 index?
Investors can gain exposure to the FTSE 100 index and its constituents easily through exchange-traded funds (ETFs). However, there aren’t any FTSE 100 ETFs trading on American stock exchanges. Some footsie constituents have their American Depository Receipts (ADRs) listed on the US exchanges, which you can buy.
Some of the largest FTSE 100 ETFs are the iShares Core FTSE 100 UCITS ETF, Vanguard FTSE 100 UCITS ETF, DBX FTSE 100, and HSBC FTSE 100 ETF.
Other FTSE indices
Besides the FTSE 100, some of the FTSE Group’s other popular indices are the FTSE 250 and FTSE 350. The FTSE 250 consists of the next 250 largest companies listed on London Stock Exchange after the FTSE 100. The FTSE 350 index consists of 350 largest companies on LSE, combining the FTSE 100 and FTSE 250.
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