There are two ways that individuals can get exposure to FTSE 100: trading and investing. We’ll look at how to invest in FTSE 100 and how you can speculate about its price. Can you buy FTSE 100 shares?
Investing in FTSE 100: what you need to know
FTSE 100 – the index of 100 largest British public companies in terms of market capitalization – has become a popular way to gain exposure to the UK stock market and track the results of the country’s economic condition.
The market capitalization of the index has increased six times since its inception in 1984, because its members have achieved success and growth.
Because the stock index is simply a number representing a group of shares on the stock exchange – in this case on the London Stock Exchange (LSE) – you cannot directly invest in it. An alternative way of exposure is to invest in shares of FTSE 100 companies or in ETFs. But for those who want to get exposure to the index itself, there is another way: index trading.
How to invest in FTSE 100
Buy FTSE 100 shares directly You can buy individual shares from the FTSE 100 index using a brokerage platform or stock trading. You can buy one share of each company to create your own index or buy shares of selected companies.
Depending on the platform used, transaction fees or commissions may be charged for each purchased share, which can be quite expensive.
Invest in ETF FTSE 100 If you want to get involved in all companies in FTSE 100 without buying individual shares (and avoiding transaction fees), you can instead invest in ETF FTSE 100. These are index funds that track the performance of your shares in FTSE 100.
How to start trading FTSE 100 Regardless of whether you want to invest directly in FTSE 100 shares or invest in ETF FTSE 100, you must open an account in the trading platform or brokerage office.
Purchase of 100 FTSE shares
During the stock market crash, some investors may think that buying FTSE 100 shares carries too much risk. Therefore, other investments such as cryptocurrencies can be considered.
But cryptocurrencies like Bitcoin have no base value. This is one of the reasons why its price may fluctuate sharply. By buying stocks, you are buying some real business.
The recent fall in share prices means that some UK quality companies could trade below intrinsic value.
In fact, the FTSE 100 is not particularly representative of the British economy. It is dominated by large global players – a quarter of the index consists of the five largest companies: Royal Dutch Shell, HSBC, BP, British American Tobacco and GlaxoSmithKline. In total, more than 100% of FTSE’s profits come from abroad.
Smaller and medium risk companies that do not cut FTSE 100 appear to be more focused on the domestic market. These companies achieved better results than their larger counterparts over the past 15 years – the FTSE 250 index increased by 306.9% between the end of December 1999 and the beginning of March 2015, With dividends reinvested, although previous results should not be seen as an indicator future returns.