They’ll look for signals such as a falling unemployment rate, which means more people are holding down jobs and able to spend more on housing, travel and shopping. For that reason, investors often choose to track this index if they believe the next few years will be bright for the British economy. Interestingly, many of the traditionally ‘British’ companies, like manufacturers and house-building companies, are often found in the FTSE 250. Companies in this index are generally known as the ‘mid-caps’, meaning that they have a capitalisation (what they would be worth if you sold them) that is somewhere in the middle between the FTSE 100 and all the other tiddly little companies that are listed below. The next 250 biggest companies in size make up the FTSE 250 – in other words, the companies ranked 101 to 350 in the market. This is why they report on the FTSE 100 in the news – if the FTSE 100 is up a few points then the overall feeling is positive – companies are generally perceived to be doing well. The top 100 companies represent about 80% of the value of the whole of the London-based market (the FTSE All-Share), so you can get a pretty good idea of what the stock market as a whole is doing from how these top 100 companies are performing. This measures the largest 100 companies in the UK by value. We’ll focus on the FTSE indices here because AIM investments suit more experienced investors. The only market that companies don’t have to meet such stringent regulations for is the Alternative Investment Market, which is often for smaller or newer companies and is regulated directly by the London Stock Exchange (instead of UKLA). The FTSE 100 and the FTSE All-Share tend to perform pretty similarly, but the third, the FTSE 250, goes up and down a little more because it’s made up of middle-sized companies, for which the prices can be a bit more volatile.Īny company listed on the London Stock Exchange must adhere to strict financial regulations set by the Financial Conduct Authority. We recommend you start by tracking one of the three main UK indices. Get FREE investment guides here to help you learn to invest in the stock market for profit Investing using index trackers means you can put your money into several of these global exchanges to diversify your portfolio. AIM (Smaller companies not yet listed on the LSE).FTSE All-Share (all companies listed on the LSE).FTSE 250 (companies that start at 101 and finish at 350 in the LSE – also known as the ‘mid-caps’).FTSE 100 (the top 100 companies listed on the London Stock Exchange).The most common indices you’ll see tracker funds follow include: You could also invest in an overseas index tracker – which is a much simpler way to invest in global funds than buying individual shares. You might follow a UK-specific index like the FTSE 100, which is made up of the top 100 companies in the UK. Indices across the globe can be tracked too. This varies every day as the markets change. When the index average goes up – or down – your share value does the same. Your money is invested in every company in that defined index, so you effectively invest in the index itself. Instead, these funds track (see? Clue is in the name!) a part of a stock market index. Tracker funds aren’t like a single company that you buy shares in. Investing in various companies spreads the risk: if one of your share companies doesn’t perform well, but another does brilliantly, you’ll gain overall. This is called ‘diversifying your portfolio’. You can buy as little as one share in one company – but it’s better to buy several shares in a range of companies. When the company does well, your share price goes up – and you often receive an income from dividends, when the company distributes some profits to shareholders. You can then buy a little part of that company, called a share.
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