FTSE 100

The FTSE 100 is the primary benchmark index of the UK stock market, representing the performance of the 100 largest companies listed on the London Stock Exchange (LSE). It is one of the most widely tracked indices in Europe and plays an important role in global equity markets.
For investors—especially those looking to diversify internationally—the FTSE 100 offers exposure to large, globally diversified companies with significant international revenues, making it a unique index compared to purely domestic market benchmarks.

What is the FTSE 100 Index?

The FTSE 100 stands for the Financial Times Stock Exchange 100 Index. It tracks the share price performance of the top 100 companies by market capitalisation listed on the London Stock Exchange.
The index is maintained by FTSE Russell, a subsidiary of the London Stock Exchange Group (LSEG), and is widely used as:

• A benchmark for the UK equity market
• A reference index for European and global investors
• The underlying index for multiple ETFs and index funds

History of the FTSE 100

The FTSE 100 was launched on 3 January 1984, with a base value of 1,000 points. It was created to provide a clear and transparent measure of the performance of the UK’s largest publicly traded companies.
Over the years, the index has evolved alongside the UK economy and global markets, reflecting changes in industry composition, corporate growth, and globalisation. Today, the FTSE 100 is recognised as one of the most important equity indices in the world.

How Does the FTSE 100 Work?

The FTSE 100 is a free-float market capitalisation–weighted index. This means:
Companies with larger market capitalisation have a greater influence on index movements

Only shares available for public trading (free float) are considered

Large companies like multinational energy, mining, and financial firms tend to dominate the index

As a result, changes in the share prices of the largest constituents can significantly impact the FTSE 100’s overall performance.

Composition of the FTSE 100

The FTSE 100 consists of 100 large-cap companies across various sectors of the UK economy. However, a key characteristic of the index is its global exposure.
Key Features

• 100 largest companies by market capitalisation
• Many constituents generate a majority of their revenue outside the UK
• Strong presence of multinational corporations

Examples of FTSE 100 Companies

• BP
• Shell
• HSBC
• Unilever
• AstraZeneca
• Rio Tinto

How Companies Are Selected for the FTSE 100

FTSE Russell reviews the FTSE 100 quarterly (March, June, September, and December).
Key points of the selection process:

• Companies are ranked by market capitalisation
• Top 100 eligible companies are included
• A buffer zone is used to reduce excessive turnover
• Companies can be promoted to or demoted from the index based on rankings

This process ensures the index remains representative of the UK’s largest listed companies.

FTSE 100 Sector Weightage

The FTSE 100 has a distinct sector composition compared to indices like the S&P 500.
Dominant Sectors

• Energy (oil & gas majors)
• Financials (banks and insurers)
• Mining & Materials
• Healthcare
• Consumer Staples

Due to this composition, the FTSE 100 is often more sensitive to commodity prices and global economic trends than domestic UK demand alone.

Why Is the FTSE 100 Important?

The FTSE 100 is important because it:

• Represents the performance of the UK’s largest companies
• Acts as a key indicator of investor sentiment toward UK-listed equities
• Reflects global economic trends due to multinational exposure
• Influences European and global equity markets
• Movements in the FTSE 100 are closely watched by institutional investors worldwide.

Risks of Investing in the FTSE 100

Like all equity investments, the FTSE 100 carries risks:

• Market risk: Index can decline during global market downturns
• Currency risk: GBP fluctuations affect returns for non-UK investors
• Sector concentration risk: Heavy exposure to energy and financials
• Political and regulatory risk: UK-specific developments

Understanding these risks is essential before investing.

Who Should Invest in the FTSE 100?

The FTSE 100 may be suitable for:

• Investors seeking international diversification
• Income-focused investors due to higher dividend yields
• Long-term global equity investors

It may be less suitable for investors seeking high-growth, tech-heavy exposure.