The FTSE index is also commonly known as the FTSE 100, and stands for the Financial Times Stock Exchange 100. The FTSE (pronounced ‘footsie’) tracks the 100 stocks with the highest market capitalisation listed on the London Stock Exchange. As many of the stocks tracked by the FTSE are large multinational companies, it is not widely regarded as the best indicator of the performance of the UK economy. That being said, it is by far the most widely used indicator of the UK stock market.
This page will take you through a quick history of the FTSE, explain how the stocks it tracks are selected, and let you know how you can invest in the index.
The FTSE index was originally founded by the Financial Times in partnership with the London Stock Exchange, with the FTSE All-Share Index being created in 1962. This original index tracked the performance of the top 594 UK companies by market capitalisation. The FTSE 100 index was not created until 1984, and today the stocks this index tracks account for over 80% of the London Stock Exchange’s total value.
As a company the FTSE Group started to go global after it became an independent company in 1995. It quickly opened new offices in New York (1999), Paris (2000), Hong Kong, Frankfurt, and San Francisco (all 2001), Madrid (2002), and Tokyo (2003). Today, the FTSE Group has been wholly owned by the London Stock Exchange since 2011.
The FTSE 100 saw sharp falls during both the dotcom crash of the early 2000s and the 2007-08 financial crisis, with strong recoveries posted after both of these events. Having started in 1984 with a base level of 1000 on 3rd January 1984, the FTSE’s peak to date came on 22nd May 2018 when the index closed at 7,877.45.
The FTSE 100 is set up to track the performance of the top 100 stocks listed on the London Stock Exchange by market capitalisation. This means it includes some of the UK’s (and the world’s) best-known companies, such as, Barclays, Royal Dutch Shell, and Unilever.
When investing in any index, including the FTSE, one of the best options is with an exchange-traded fund (ETF). ETFs are designed to match the performance of an index, but unlike other products such as mutual funds they can also be traded on exchanges. This means investors get access to high levels of diversification, while maintaining flexibility.