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How to invest in FTSE 100 index funds in 2023

Find out how to invest in the FTSE 100 index, learn which trading platforms have the lowest fees, and what’s easiest for beginners.

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Updated: May 12, 2023

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It only takes a few minutes to invest in the FTSE 100 index. One of the simplest and most popular ways to invest is to buy shares in a Vanguard FTSE 100 ETF through an online trading platform.

Where can I invest in the FTSE 100 index?

According to our expert research, eToro is the best ETF broker to invest in FTSE 100 index funds.

Both FTSE 100 ETFs and FTSE 100 CFDs are available to invest in through eToro .

Here are three more places to buy the FTSE 100, ranked according to their cost, security, and features.

How do I invest in the UKX index?

The easiest way is to sign up to a stock broker, open an investment account, and buy shares in an FTSE 100 ETF or CFD. This guide explains how to do it:

Step 1. Sign up to eToro

We recommend using eToro to invest in FTSE 100. Sign up for a brokerage account and deposit some money. You may need to supply a form of photo ID to verify the account.

Step 2. Decide how to buy the FTSE 100

This boils down to choosing between an FTSE 100 ETF or CFD. ETFs are generally better suited to investors who want to passively track the FTSE 100’s performance. CFDs offer a greater range of trading options: you can use leverage, short the index, or buy and sell it outside of trading hours.

Step 3. Invest in the FTSE 100

Sign into your trading account and search for the FTSE 100. Hit the ‘buy’ button and enter the details of your purchase, such as how much you want to spend. Hit ‘buy’ again to execute the trade.

Step 4. Monitor your investment

When you buy a CFD, the trade goes through more or less instantly, and you’ll be able to see your new open position in your trading account. ETF purchases can take longer, and if you buy outside of traditional trading hours it won’t go through until the next morning.

Your trading account will show the price change in the FTSE 100 since you bought it, so you can see your profit/loss at a glance. Use that information, along with your own research, to decide when to sell the FTSE 100 and close your position, ideally at a profit!

The different ways to invest in the UKX

As we mentioned above, there are numerous ways to put your money into the FTSE 100. ETFs and CFDs are the simplest options for beginners, but there are alternatives. Here’s a brief overview of each option and who it’s best suited for.

FTSE 100 ETFs

An ETF (exchange-traded fund) is an investment fund traded on a stock exchange, much like a stock. Exchange traded funds can hold different assets, such as individual stocks, bonds, or commodities, or serve as a proxy for a stock market index.

An FTSE 100 ETF is one way of investing in the FTSE 100. It’s simply an investment fund that mirrors the performance of the FTSE 100. When you buy shares in the fund, the value of your investment will rise or fall with the FTSE 100 itself.

ETFs are ideal for new investors because they have a very low minimum investment. You can start with a few pounds and get exposure to some of the world’s largest companies. They’re also practical if you plan on trading the FTSE 100 index, because you can buy or sell shares in the fund throughout the day.

Examples of popular UKX ETFs

iShares Core FTSE 100 ETF (ISF)
Vanguard FTSE 100 ETF (VUKE)
HSBC FTSE 100 ETF (HUKX)

FTSE 100 index funds

An index or mutual fund is an investment fund that aims to track the performance of a stock market index, such as the FTSE 100. It’s very similar to an ETF, in that there are low management fees and you can buy shares through your online broker.

However, there are a couple of differences. FTSE 100 index funds are only priced at the end of each trading day, so you can buy or sell shares in the fund once per day. There may also be a higher barrier to entry, through a much larger minimum investment when you invest in FTSE 100 index funds.

That means an FTSE 100 mutual fund is better suited for long term investors with a higher initial budget, where the infrequent trading and barriers to entry are far less of an issue.

Examples of popular UKX index funds/mutual funds

Vanguard FTSE 100 Index Unit Trust (VAFTIGI)
HSBC FTSE 100 Index Fund (HCOIA)

FTSE 100 CFDs

CFDs (contracts for difference) are a way to speculate on FTSE 100 price changes with more flexibility than if you use an ETF or index fund. A CFD is a ‘derivative’, which means it gets its value from the underlying asset – in this case the FTSE 100 – but it’s separate from it.

As a result, CFDs can be leveraged, where you borrow money to multiply the size of the trade, or they can be used to go ‘short’, where you place a trade on the index to fall in value. You can also buy and sell them outside of regular trading hours.

All of this means FTSE 100 CFDs offer the potential to outperform a fund that passively tracks the FTSE 100’s performance. Of course, you can also underperform it as well. Tools like leverage and shorting introduce a lot more risk, and are best left to experienced traders.

FTSE 100 futures

Futures contracts are agreements to buy or sell the UKX at an agreed price on a set date in the future. FTSE 100 futures are a means to predict how you think the index is going to perform over a set time frame, such as the next three or six months.

Most futures contracts involve leverage, so you only put up a small part of the total trade value (the margin) when you buy one. That makes futures more risky, and they require a bit more financial expertise to understand as well.

Some traders use futures as a hedge against the performance of stocks they own. For instance, if you own stocks that are part of the FTSE 100 then you might want to short the FTSE 100 so that you still make some money if the price falls.

FTSE 100 stocks

Another way to invest in the FTSE 100 is to buy shares in the individual stocks that the index tracks. It isn’t practical to buy every share in the index, but you can invest directly into a few of the most heavily weighted stocks in the FTSE 100 in order to get broad exposure to its performance.

The most heavily weighted stocks in the FTSE 100 tend to be the largest companies by market capitalisation. If you invest directly in those largest stocks, you gain exposure to the index without taking on the risk of all the underlying companies.

One reason to do this is that these larger companies with the highest market cap dominate the index anyway, so that it can give you the impression of a diversified portfolio while actually being reliant on the performance of those particular stocks.

For the FTSE 100 index, the largest stocks you might choose to invest in are:

Company	Index weight
Shell PLC (SHEL)	8.36%
AstraZeneca PLC (AZN)	7.76%
HSBC Holdings PLC (HSBA)	5.95%
Unilever PLC (ULVR)	5.17%
BP PLC (BP)	4.34%
Diageo PLC (DGE)	3.94%
Glencore PLC (GLEN)	3.45%
British American Tobacco PLC (BATS)	3.44%
Rio Tinto PLC (RIO)	3.41%
GSK PLC (GSK)	2.82%

The flip side of investing directly like this is that you lose the diversification and stability that comes with buying into an entire index. It requires much more hands-on management to do your own stock picking, so it’s best suited to more experienced investors.

How much does it cost to invest in the FTSE 100 index?

From $0 to $5, depending on how you invest. For each option, you must consider the cost of buying the actual asset, whether that’s an ETF, index fund, CFD, or share, plus the fees associated with it.

Instrument	Trading fee	Management fee
Exchange traded funds	$0-$5.99	0-0.2%
Index fund / mutual fund	$0-$5.99	0.1-2%
Individual stock	$0-$3	None
CFD	$0	None

*A fee comparison of 3 leading brokers for example purposes

ETFs and CFDs are generally the cheapest option overall, as they have low fees and a low minimum investment. Index funds and mutual funds have low fees but may have a high minimum investment. Buying individual stocks is the most expensive option in absolute terms, because the share price of a single large company is often more than $100.

All options are likely to include a trading fee, which you pay each time you make a transaction. Some trading platforms offer zero-fee trading, with others it may be a few dollars.

Then ETFs and index funds each have their own expense ratio. Expense ratios refer to an annual management fee, charged as a percentage of your total investment. Expense ratios are usually no more than 0.05%, so if you invest $1,000, you would pay $5 per year in management fees.

Should I invest in the FTSE 100 index?

Yes, FTSE 100 investing is a great choice if you’re looking for a safer investment with more price stability compared to picking individual stocks. It gives you an instantly diverse portfolio with exposure to a broad area of the stock market.

The flip side is that you have less control over which companies you invest in. An index committee decides how the index works, and you can’t pick and choose the underlying companies you like the most. The FTSE 100 is better suited to hands-off investors, compared to those who have the skills, experience, and desire to pick their own stocks.

What are the advantages of investing in the FTSE 100 index?

An index provides instant stock market diversification, where you spread your risk across a large number of underlying companies, rather than one or two. Here are some more reasons why you might want to invest in the FTSE 100 index:

A convenient way to invest in the UK economy. The FTSE 100 is made up of companies that operate in the United Kingdom. It offers an easy way to invest in the country as a whole.
Get a ready-made, diversified portfolio of UK stocks. Companies from lots of different industries list on the FTSE 100. When you invest, you immediately have a portfolio that includes shares in sectors like pharmaceuticals, finance, oil and gas, and many more. This protects you against failures in one area of the economy.
It’s cheaper to invest in a FTSE 100 ETF compared to buying lots of individual stocks. A single stock in a company like Shell, Unilever, or AstraZeneca can be quite expensive, while a share in a FTSE 100 ETF is much more affordable.
Many UK companies operate around the world. FTSE 100 companies are some of the largest in the world and many of them generate much of their revenue from outside of the UK. A company like HSBC, for example, has a large presence in Asia, and investing in the FTSE 100 gives you access to lots of companies like this, so it’s less impacted by the fluctuations of the UK economy.
The FTSE 100 includes large companies with a track record of success. The FTSE 100 includes the 100 largest companies in the UK. All of these businesses have been around a while, and the strict qualification criteria means they’re relatively safe to invest in.
Lots of FTSE 100 companies pay dividends. The FTSE 100 is dominated by companies in finance, energy, and pharmaceuticals, industries which tend to pay out dividends on a regular basis. Investing in the FTSE 100 gives you access to these dividends, which can help to grow your investment budget over time.

What are the disadvantages of investing in the FTSE 100 index?

The main risk of investing in the FTSE 100 is that all the underlying companies are related in some way, so a broader economic downturn that affected the entire country would likely affect many stocks in the index at the same time. Here are some more risks of FTSE 100 investing.

The FTSE 100 is UK-focused. Investing in the FTSE 100 provides diversity across different industries and sectors, but it doesn’t provide a huge amount of geographical diversity. The performance of the FTSE 100 is tied to the UK economy, even if many of its companies generate revenue from overseas.
No way to ‘beat the market’. The performance of the FTSE 100 is the barometer by which portfolio performance is judged. By investing in the index, you can’t beat it, so your gains are more limited than they would be otherwise (so too are your losses, of course).
You can’t pick your own stocks. Investing in an index means giving up the opportunity to pick individual stocks. You may not want to invest in all the companies in the FTSE 100, but you don’t have the option to pick and choose.

FTSE 100 predictions from expert analysts

Insights from stock market analysts can give you an idea of the overall sentiment towards the FTSE 100. It may help you see things from a different perspective, or pick up things you may have missed. Here are some FTSE 100 forecasts and insights from leading experts:

The dominant theme as the FTSE 100 grinds higher seems to be that ‘better times are coming”
Russ Mould, AJ Bell

The main sectors of the UK’s large cap index are having their day in the sun compared to the previous decades which have seen these sectors trailing (…) the high flying growth sectors which have predominantly been the preserve of the US market”
James Penny, TAM Asset Management

An abundance of defensive sectors like oil, defence and tobacco has helped performance”
Lee Wild, interactive investor

Invest in the FTSE 100

FAQs

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Which FTSE 100 fund is best?

More indices to invest in

Sources & references

Risk disclaimer

James Knight

Editor of Education

James is a lead content editor for Invezz. He's an avid trader and golfer, who spends an inordinate amount of time watching Leicester City and the... read more.