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What’s the best FTSE 100 index fund?
Here are some of the best-performing FTSE 100 funds according to JustETF:
| Icon | Fund | 5-year performance | 1-year performance (to March 2023) | Link to invest |
|---|---|---|---|---|
 | Vanguard FTSE 100 (VUKE) | 32.37% | 14.59% | Invest with FreetradeCapital at risk |
 | iShares Core FTSE 100 (CUKX) | 31.75% | 14.57% | Invest with FreetradeCapital at risk |
 | Invesco FTSE 100 (S100) | 30.23% | 14.42% | Invest with FreetradeCapital at risk |
 | HSBC FTSE 100 (HUKX) | 31.54% | 14.03% | Invest with SaxoCapital at risk |
 | Lyxor FTSE 100 (100D) | 30.59% | 14.26% | Invest with FreetradeCapital at risk |
 | Xtrackers FTSE 100 (XDUK) | 31.66% | 14.36% | Invest with IGCapital at risk |
Even if you’re new to investing, you’ve probably heard of the FTSE 100 – the UK’s best-known stock market index. Find out why it’s popular with investors in the UK and worldwide, which stocks make up the FTSE 100, and how you can invest in it.
What is the FTSE 100?
The Financial Times Stock Exchange 100 (FTSE 100 for short, which is pronounced “footsy”) is a stock market index comprising the 100 largest companies on the London Stock Exchange (by market capitalisation). This includes companies such as Barclays, BP, HSBC and Sainsbury’s.
Can you invest in the FTSE 100?
You may hear investment experts talk about investing in the FTSE 100, so it’s easy to make the assumption that it is an investment fund. But it’s actually an index. Think of an index as a hypothetical portfolio, designed to monitor the performance of the assets it contains (in this case, stocks in large UK companies). As such, you can’t actually invest directly in the FTSE 100.
However, you can gain exposure to FTSE 100 companies by either buying shares in each individual company or by investing in a fund – such as an exchange traded fund (ETF) – that tracks the performance of the stocks in the FTSE 100.
How to invest in the FTSE 100
- Open a share dealing platform. Whether you want to invest directly in FTSE 100 stocks or invest in a FTSE 100 ETF, you’ll need to open an account with a trading platform or brokerage.
- Fund your account. You need to put money in your account to buy shares or invest in a fund, either by bank transfer or using a debit card.
- Choose your investments. Either select an investment fund or, if you want to buy stocks, do some research into the companies you’re considering. Once you know what you want, find the stocks on your platform.
- Hit buy. It’s as simple as that.
Platforms where you can invest in the FTSE 100
These trading apps allow you to invest in companies within the FTSE 100 directly or to invest in FTSE 100 funds/ETFs.
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Why should you invest in the FTSE 100?
Finder expert Zoe Stabler answers
Investing in the FTSE 100 tends to be regarded as a relatively safe and low-risk bet – insofar as investing is ever “safe and low-risk”. No investment is risk-free.
Because it’s made up of the UK’s biggest companies, the FTSE 100 tends to include businesses that have been around a while. Companies that have a track record of solid performance. This might mean they’re not the most exciting (or potentially most rewarding) companies to invest in, but the chances of them crashing are also lower than average. All of this makes the FTSE 100 a decent bet if you want to manage your risk levels. Plus, if you opt to buy shares, many FTSE 100 stocks pay dividends.
As we always bang on about, though, it’s essential to have a diverse investment portfolio. So, while a FTSE 100 tracker fund will likely feature in many investors’ portfolios, there’s no need to put all your eggs in one basket. There’s nothing stopping you from investing in the FTSE 100, while also bolstering your portfolio with an even lower-risk investment (such as bonds) and a selection of higher-risk, higher-reward assets.
Ways to invest in the FTSE 100
There are a couple of ways to invest in the FTSE 100:
- Buy FTSE 100 stocks directly. You can buy individual stocks from the FTSE 100 index using a brokerage or share trading platform. You could buy one share of each company to create your own portfolio of FTSE 100 stocks, or buy shares in selected companies.
- Invest in a FTSE 100 index fund or ETF. If you want exposure to all the companies in the FTSE 100 without having to buy individual shares (and avoiding trading fees), you could instead invest in a FTSE 100 fund or ETF. These track the performance of the stocks in the FTSE 100.
The FTSE 100 is made up of some really exciting companies, including Burberry, Coca-Cola and Ocado. Because of its appeal, there are lots of funds and ETFs that track the index.
Investors can also choose to invest in all the individual stocks themselves, but this would take a lot of time, especially as the index changes regularly. You would need to keep tabs on which stocks have moved out of the index, which have moved in, and whether any weightings need to be changed. An index fund would be a great deal easier and could save you money on commission too.
Best trading platform for ETFs: IG
We chose IG as our top pick because of the following:
- Invest in over 10,000 shares, funds and investment trusts.
- Low costs – zero commission on US shares, £3 on UK shares.
- Support is available 24 hours a day from Sunday to Friday.
Need to know: If your account is inactive for more than 24 months, you will be charged a rolling fee for account inactivity.
Read our review of IG.
Compare FTSE 100 trading platforms
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All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.
FTSE 100 performance
You can use the chart below to track the performance of the FTSE 100:
List of companies in the FTSE 100
The drop-down below shows a complete list of companies in the FTSE 100 as of 14 September 2022, listed alphabetically. Companies in the FTSE 100 are switched up to 4 times a year, to ensure it consists of the biggest 100 UK firms.
What’s the 1-, 3- and 5-year return on the FTSE 100?
To give you an idea of the likely returns of investing in the FTSE 100, below we’ve shown the 1-, 3- and 5-year price returns of the index, starting from 2016. Price returns are directly linked to the index value and don’t include any dividends you might receive if you invested directly in stocks in FTSE 100 companies. These returns illustrate the importance of investing for the long term, as the value of the index has experienced short-term fluctuations over this period.
| Year | Index value* | 1-year return | 3-year return | 5-year return |
|---|---|---|---|---|
| 2021 | 7384.54 | 14.3% | 9.8% | 3.4% |
| 2020 | 6460.52 | -14.3% | -16.0% | 3.5% |
| 2019 | 7542.44 | 12.1% | 5.6% | 14.9% |
| 2018 | 6728.13 | -12.5% | 7.8% | -0.3% |
| 2017 | 7687.77 | 7.6% | 17.1% | 30.3% |
| 2016 | 7142.83 | 14.4% | 5.8% | 28.2% |
*At the end of the year
Pros and cons of investing in the FTSE 100
Pros
- Get exposure to the largest stocks on the London Stock Exchange
- A lot of stocks on the FTSE 100 pay dividends
- Invest easily with an index fund or ETF
Cons
- You can’t beat the market if you’re investing in the index that the market is based on
- No diversification — you’re only invested in UK stocks
- No choice. Choosing the top stocks on a stock exchange could take the excitement out of choosing stocks.
Bottom line
The FTSE 100 contains some of the best-known British brands, such as Lloyds, Rightmove and Rolls-Royce. You can invest in all 100 stocks individually if you have the time, but it could be more expensive this way. There are index funds and ETFs that track the indices, which could be a more cost-effective way to get exposure to these stocks. Make sure you consider the fees involved and that your broker lets you invest in stocks on the London Stock Exchange.
All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.
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