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Compare the best FTSE 100 ETFs
Exchange-traded funds (ETFs) have become one of the most popular methods for investing in indices such as the FTSE 100 in recent years, due to the fact they’re simple and inexpensive to trade.
An FTSE 100 ETF lets you benefit from 100 stocks representing some of the largest and most influential companies in the world with just one trade. This page will help you learn the best strategies for investing in one.
Best FTSE 100 ETFs
There are plenty of different ETFs that track the FTSE 100 index. The key is finding one that suits your investing goals. The best ones are covered in the table below:
|#||ETF Name||Get started|
|1||iShares Core FTSE 100 UCITS ETF||Invest now >|
|2||Vanguard FTSE 100 UCITS ETF||Invest now >|
|3||iShares Core FTSE 100 UCITS ETF GBP||Invest now >|
|4||HSBC FTSE 100 UCITS ETF GBP||Invest now >|
|5||Xtrackers FTSE 100 UCITS ETF 1C||Invest now >|
Brokers offering FTSE 100 ETFs
There’s no shortage of online brokers that can give you the ability to trade ETFs. Choose one from this table of top brokers:
What is a FTSE 100 ETF?
A FTSE ETF is an exchange-traded fund (ETF) that follows the performance of the FTSE 100 index. The FTSE 100 is compiled of the 100 stocks on the London Stock Exchange with the highest market capitalisation, and the index is one of the most well-known in the world. There are similarities between the FTSE 100 and other famous indices such as the S&P 500, with the biggest differences being the S&P 500 containing five times as many stocks and the two indices tracking the performance of the UK and USA respectively.
Examples of prominent ones include the HSBC FTSE 100 UCITS ETF and the Vanguard FTSE 100 UCITS ETF.
Is it a good investment?
ETFs can be good investments for multiple reasons, but it all depends on your investment strategy and goals. First, the size and stability of the FTSE 100 index means you have less to fear in terms of a catastrophic market event wiping out all (or most) of your money in one day.
Investing in one offers the benefit of diversification, since it tracks the performance of all 100 stocks in the FTSE 100 at once. ETFs are cheaper to trade than mutual funds, since mutual funds require investors to pay management fees to fund managers, and additionally ETFs can be traded at any point during the day on an exchange – meaning you benefit from both diversification and flexibility.
Still, just like any other kind of investment option, it comes with risk. The volatile first half of 2020 has caused a roller coaster ride for FTSE ETFs, as financial markets have been unstable during the global COVID-19 pandemic.
Your best bet is to prepare fully: get to know the ETF landscape so you can choose the one that’s right for you, and make sure the broader stock market is holding up well.
How do I trade FTSE 100 index ETFs?
You’ll need to sign up with an online broker that offers ETF trading first. Here are three important review topics to explore if you want to find the best FTSE 100 ETF:
- How to choose an ETF
- How to choose a broker
- Use our top tips to succeed
1. How to choose an ETF
There’s a bunch of different ETFs you can buy that are pegged to the FTSE 100 index. Here’s a look at some key factors to consider when picking the investment that’s right for you:
- Total value of assets. An ETF should have a minimum level of assets, with $10 million a good starting point for investors. A lower number in terms of assets means that the ETF will have limited liquidity, as well as wide price spreads. For ETF investors, these are both conditions to avoid.
- Charges and fees. ETFs generally charge low fees, coming in at just over half the fees charged by index funds. There will still be differences in the fees charged by specific ETFs though, so it’s still necessary to compare your options to get the best deal.
- Daily trading volume. Different ETFs can have significantly different average daily volume totals. There’s no set rule for how much volume you want your chosen ETF to have – other than it generally being true that the more volume you can find, the better. That’s because higher volume levels tend to make ETFs more stable and less prone to wild price swings.
- Performance over time. It’s a simple lesson, but an important one: the ETFs with the strongest track records tend to be the best bets to perform well in the future.
- Liquidity. ETF liquidity includes both the volume of units traded on an exchange, and the liquidity of individual securities within an ETF’s portfolio. Individual FTSE 100 stocks all have high liquidity. That means that (as noted earlier) average daily volume becomes the factor to watch when gauging an ETF’s liquidity.
- Whether it pays dividends. The main goal is for the price of the ETF to go up. That said, some ETFs pay dividends too, offering an added bonus for investors holding their investment for the long term. Those ETFs do this by collecting the dividends offered by whichever of the 100 individual FTSE 100 stocks offer them, then distributing a combined dividend to ETF investors.
- Location and tax status. An ETF can be subject to the laws of whatever country in which it’s based. If you’re deciding between two with similar track records and one of them is based in a lower-tax country, you might want to consider going for the latter. Always check your precise tax liabilities first, though.
- Leverage. When trading with leverage, you’re putting down just a small percentage of the total trade, with your broker handling the rest. Many brokers will enable you to trade with leverage. That said, trading with leverage opens up the possibility of both bigger gains and bigger losses than non-leveraged trades, and it’s thus a strategy that’s more highly recommended for more experienced investors.
2. How to choose a broker
You’ll need to find a broker that can facilitate these trades. There are a wide variety of different online trading platforms from which you can choose, so we’ve compiled this list of what you want to look out for when selecting the right broker for you.
- What services they offer. The first step you need to check is that the broker you have selected offers ETF trading, and whether – if so – you’ll be able to use the platform to buy and trade FTSE 100 ETFs. Beyond this you might want to check other trading options the broker offers, such as how much leverage you can trade with.
- Whether the platform offers a demo account. If you’re new to ETF trading, then it’s wise to start off with a demo account. These are offered by many brokers and allow you to place trades without risking any of your capital. You won’t make any money with a demo account, but using one to learn the ropes can prevent losses later on.
- The fees charged. Trading ETFs often incurs fees, and these will vary from broker to broker. Sometimes there’ll be a flat rate for making trades, and sometimes brokers will charge commission. Check out the fees charged by a broker before signing up to their service.
- Financial limits. Brokers will often apply a variety of limits to users’ trading activities. This can include deposit/withdrawal minimums and maximums or daily ETF trading limits. Make sure you pick a provider that can cater to the level of trading you’re looking to be doing.
- Security features and regulation. When investing your money with a platform, you want to ensure that it is reputable, complies with relevant legislation, and has good online security features. You can find reliable brokers by looking through our reviews, or simply follow the links to brokers that are listed on this page.
3. Use our top tips before investing
Before investing, it’s a good idea to have a plan. Follow these steps to build an intelligent investing plan:
- Do your research. Study the top options from the list provided above. Compare each one to your own specific investing goals before deciding which ETF to choose.
- Set a budget. Setting a budget can help you strip emotions such as fear and greed out of your decision-making process. Managing your budget also enables you to have plenty of money left over for future trades, even if you make a bunch of mistakes when you’re getting started. Never forget the golden rule: don’t invest more than you can afford to lose.
- Select the right platform. We’ve reviewed all the best platforms that offer ETF trading on our site to help you make the right choice. Choose the broker you want based on the criteria that are most important to you, whether that’s low transaction fees, ease of use, or any others.
- Grow your investments over time. As a beginner investor, you should consider investing with a smaller amount of money at first. You can always raise the size of your bets as you gain expertise and experience.
- Think long-term. While they can be used for shorter-term trading, there’s plenty of potential for bigger long-term gains. Your best chance for impressive long-term gains will come during a bull market if you can buy and hold as the stock market rises over time.
Ready? Here’s our top recommended broker
What should I do now?
If you’re ready to trade, then simply choose an ETF broker that’s right for you and get trading. Need more time first? Peruse our investing courses and news updates to help you become better prepared to trade.
Try some of our investment courses for beginners
Still feeling unsure of what to do? That’s OK. Take the time to do more research, including reviewing all of our educational content.
What Is Spread Betting? The Beginners Guide
What is a Short Squeeze?
What is a hedge fund?
Fact-checking & references
Our editors fact-check all content to ensure compliance with our strict editorial policy. The information in this article is supported by the following reliable sources.
Invezz is a place where people can find reliable, unbiased information about finance, trading, and investing – but we do not offer financial advice and users should always carry out their own research. The assets covered on this website, including stocks, cryptocurrencies, and commodities can be highly volatile and new investors often lose money. Success in the financial markets is not guaranteed, and users should never invest more than they can afford to lose. You should consider your own personal circumstances and take the time to explore all your options before making any investment. Read our risk disclaimer >