The FTSE 100 Index
The FTSE is the British index also in an informal way –footsie- or also known as FTSE 100.
It represents the rate of the shares of the first 100 capitalized companies of the
United Kingdom, all currently existing on the Stock Exchange of London. The index started
to be used on January, 1984 with a number base of 1000.
As far as statistics are concerned the highest value was reached on 1999, at the end December
with a value of about 7000. According to latest statistics in 2008, the market value and
capital of the FTSE 100 was about 1200 billion British pounds. It is the most vastly utilized
among the group of index represented by FTSE. There are, in fact, different types of indices:
FTSE 100 represents companies of around 80% of the market value of the London Stock Exchange.
It is the most used indication of the trading situation.
The FTSE 250 is a list of the most
important 250 companies and the
FTSE 350 is the sum of FTSE 100 and FTSE 250.
The All-Share
index is the aggregation of the FTSE small cap, FTSE 100 and FTSE 250
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The partner companies are usually revised and decided quarterly; the biggest companies in the FTSE 250 index are promoted if their trading capitalization would put them in the first 90 companies of the FTSE 100 Index. The 5 largest companies belonging to the FTSE 100 index are the Vodafone Group, HSBC Holdings, British Petroleum, GlaxoSmithKline chemicals and the Royal Dutch Shell. They were valued more than 60 billion British Sterling.
The companies that are part of the FTSE must meet different requirements decided by the FTSE Group such as having a listing on the London Stock Exchange, with a Pound or Euro called price on SETS. They must also be able to meet some kind of tests about their liquidity, their nationality and free float. FTSE's index rules and procedures assure that indices are investable and readily trackable. The index has have clear rules that are publicly available and which govern index management in all foreseeable eventualities.
| FTSE 100 Sectors Listing by Constituent Weighting |
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| Sector | Weight |
| Financials | 19.68% |
| Oil and Gas | 19.58% |
| Basic Materials | 14.50% |
| Consumer Goods | 13.10% |
| Consumer Services | 8.38% |
| Health Care | 8.34% |
| Telecommunications | 6.64% |
| Industrials | 4.64% |
| Utilities | 4.10% |
| Technology | 1.02% |
All FTSE indices are managed to ensure that sufficient liquidity is available in any listed stock. The FTSE 100 like all FTSE Indices established specific liquidity rules to assure the tradability of the indices by eliminating any instruments that are not readily available to buy and sell which results in narrower spreads which lowers trading costs.
According to historical decisions and by law, the companies in this index must include the acronym plc at the finishing line of their name. So they indicate their standing of the public limited company. Only few companies are excluded by these indications and some exceptions remains. The FTSE trading usually it is open from 8.00 in the morning to 4.29 in the afternoon.
Index tracking funds are an excellent vehicle to invest in the general markets. There are now a number of firms that offer these instruments that have been available to professional money managers for decades but now accessible to small investors.
Since most money managers very rarely beat the performance of the indexes over time the tracker funds offer good diversity and broad market exposure along with low operating costs. Most managed funds charge up to 5% up-front plus 1.5% to 2% of the fund's value yearly while an index fund has no up-front charges and only 0.25% to 1% annually.
Some of the trackers funds purchase shares in all the listed equities that represent the index while others attempt to track the index performance with complex financial devices that result in holding a variety of different companies with the intent to have equal performance with the index. This is the reason that there are slight variations in the different tracker funds performances but these variations are normally very small.
Based on past performance the trackers provide good value for their holders. On markets rise they are some of the best performers but in market downturns they do not perform quite as well against many of the managed funds that use hedges to offset large loses. Even in this case the indexes outperform most of the popular managed funds used by the majority of small investors.