How to invest in the FTSE 100

Find out about the UK's most famous stock index and how you can invest in it

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), which includes companies like BP, HSBC, Barclays and Sainsbury’s. Find out which stocks make up the FTSE 100, how you can invest in them and some FTSE 100 ETFs.

Can you invest in the FTSE 100?

While you can’t actually invest directly into the FTSE 100 (unless you bought shares in each of the companies in the index), you can get exposure to the index by investing in an exchange-traded fund (ETF) which tracks the performance of the stocks in the FTSE 100.

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 select 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 an 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 Coca-Cola, Burberry and NatWest. Many people believe that the FTSE 100 is an ETF or a fund, but it’s an index – which can be thought of as a hypothetical portfolio. Because of its appeal, there are funds and ETFs that track the index.

Investors can also choose to invest in all the individual stocks themselves, but this would take an awful lot of time, especially as the index changes all the time. 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

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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.

The FTSE 100 and coronavirus

As with the rest of the UK stock market, the FTSE 100 dropped significantly in March 2020 in the face of the coronavirus pandemic. While every stock in the index experienced volatility, some fared better than others. The potential advantage of investing in an index is to help diversify your portfolio and mitigate exposure to risk. However, certain FTSE 100 stocks are likely to perform markedly better or worse than others over the coming months, and it may be worth curating a list of FTSE 100 companies you want to invest in.

How did the FTSE100 perform in 2020?

How to invest in the FTSE 100

  1. 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.
  2. Fund your account. You need to put money in your account to buy shares, either by bank transfer or using a debit card.
  3. Choose your stocks. Do some research into the stocks you want to buy. Once you know what you want, find them on your platform.
  4. Hit buy. It’s as simple as that!

Compare FTSE 100 trading platforms

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Name Product Ratings Finder rating Customer rating Min. initial deposit Price per trade Frequent trader rate Platform fee Offer Link
IG Share Dealing
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£250
UK: £8
US: £10
EU: 0.1% (min €10)
UK: £3
US: £0
EU: 0.1% (min €10)
£0

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Platform details
FREE TRADES
eToro Free Stocks
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$10
£0
N/A
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Platform details
interactive investor Trading Account
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£0
£7.99 (with one free trade per month)
£0
£9.99 per month

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Capital.com
Capital.com
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Not yet rated
Not yet rated
£20
£0
£0
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Degiro Share Dealing
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£0.01
UK: £1.75 + 0.014% (max £5)
US: €0
N/A
£0

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Platform details
Hargreaves Lansdown Fund and Share Account
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£1
£11.95
£5.95
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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:

Top FTSE 100 shares by trading volume

How do FTSE 100 ETFs work?

When you buy an FTSE 100 ETF, you are not investing directly in the companies in the index. Most FTSE 100 ETFs will hold shares in the companies in the index, but you won’t yourself by just buying the ETF.

However, the ETFs performance will track closely with the performance of the stocks in the index. For example, if the FTSE 100 increases in value by 2%, your ETF should also increase close to 2%.

To invest in an ETF, you’ll generally need to pay a fee of around 0.07% to 0.25% each year, as well as any trading commissions charged by the broker.

Types of ETF

Most FTSE 100 ETFs will fully track the performance of the FTSE 100, meaning the fund is weighted more towards the companies with higher market capitalisation. However, there are some ETFs such as the db X-Trackers FTSE 100 Equal Weight UCITS ETF (XFEW) which invests in the companies in the index equally. This means the performance of smaller companies will have a larger impact on the ETF, relative to their size.

Short ETFs. There are a number of short FTSE 100 ETFs, which effectively bet against the performance of the index. If the FTSE 100 goes down, the value of a short ETF should go up.

Leveraged ETFs. Leveraged ETFs multiply the gains and losses of the index, meaning you’ll get a higher or lower return relative to the size of your investment. You’re effectively borrowing extra capital to potentially increase your returns. For example, if you invest £1,000 in a FTSE 100 ETF with 10x leverage and it goes up 5%, you’d make £500 instead of £50. However, the same would apply to losses.

FTSE 100 ETFs

FundCurrencyTickerFee (TER p.a.)
HSBC FTSE 100 UCITS ETF GBPGBPHUKX0.07%
iShares Core FTSE 100 UCITS ETF (Dist)GBPISF0.07%
iShares Core FTSE 100 UCITS ETF GBP (Acc)GBPCUKX0.07%
Invesco FTSE 100 UCITS ETFGBPS1000.09%
Xtrackers FTSE 100 UCITS ETF 1CGBPXDUK0.09%
Xtrackers FTSE 100 UCITS ETF Income 1DGBPXUKX0.09%
Vanguard FTSE 100 UCITS ETF (GBP) AccumulatingGBPVUKG0.09%
Vanguard FTSE 100 UCITS ETF DistributingGBPVUKE0.09%
Lyxor FTSE 100 UCITS ETF C-GBPGBPL1000.14%
Lyxor FTSE 100 UCITS ETF D-GBPGBP100D0.14%
UBS ETF (LU) FTSE 100 UCITS ETF (GBP) A-disGBPUB030.20%
Amundi ETF FTSE 100 UCITS ETF GBPGBPFT1K0.25%

List of companies in the FTSE 100

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 FTSE100 contains some of the best known British brands, like Tui, Rightmove, Ocado and Lloyds. 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 and 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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