Looking to invest in the UK stock market? You’ll come across 2 prominent indices: the FTSE 100 and FTSE 250. The FTSE 100 represents the top 100 stocks on the London Stock Exchange by size, while the FTSE 250 comprises the subsequent 250 stocks.
With the biggest 100 companies, you get heavy-hitting multinationals that collect revenues mainly from overseas. Meanwhile, the FTSE 250’s companies are more closely tied to the UK economy and arguably have more room to grow starting from a lower base.
In this head-to-head comparison, we’ll explore whether the FTSE 100 or the FTSE 250 is the better investment option.
The FTSE 100 is the top 100 stocks on the London Stock Exchange ordered by market capitalisation, while the FTSE 250 is the following 250. There’s also a FTSE 350, which is a combination of the 2 indices. The FTSE 100 and the FTSE 250 are designed to represent the overall performance of the London Stock Exchange, but as they have different concentrations of stocks, they perform differently. Typically, when referencing the FTSE, people mean the FTSE 100, as it’s the most commonly known index.
There might be some crossover between stocks on the FTSE 100 and FTSE 250, mainly because the market capitalisation of the companies is constantly changing. So, the bottom end of the FTSE 100 and the first few stocks on the FTSE 250 are often switching between the 2 indices.
This depends on how you’d define bigger. If you’re talking about the sheer number of stocks, then the FTSE 250 is bigger than the FTSE 100 as it has 150 more stocks on it. If you want to compare based on the size of the companies that make each one up, you’d compare with market capitalisation. When you do this, the FTSE 100 is worth more, at around £1.9 trillion, compared with the FTSE 250’s market cap of just £317 billion.
The FTSE 100 and FTSE 250 are chosen based on the market capitalisation of the companies that make them up, so those with higher market caps are in the FTSE 100. This means that despite having fewer stocks, the FTSE 100 is worth more than the FTSE 250, with a market cap of 6 times bigger than that of the FTSE 250.
The FTSE 100 has a more even sector split than the FTSE 250, but it’s still very heavily weighted towards financial companies and consumer staples companies. The FTSE 250 is 35% financial companies and 21% consumer discretionary companies, so it might not get you quite the diversification you’re after.
These trading apps allow you to invest in companies within each index directly or to invest in funds and ETFs.
Here are some of the best-performing FTSE 250 and FTSE 100 funds according to justETF:
| Fund | Icon | 5-year performance (to July 2024) | 1-year performance (to July 2024) | Link to invest |
|---|---|---|---|---|
| Vanguard FTSE 250 UCITS ETF Distributing (VMID) |  | 17.02% | 13.64% | Invest with XTBCapital at risk |
| Invesco FTSE 250 UCITS ETF (S250) |  | 16.07% | 13.20% | Invest with HLCapital at risk |
| Xtrackers FTSE 250 UCITS ETF 1D (XMCX) |  | 16.03% | 13.25% | Invest with XTBCapital at risk |
| HSBC FTSE 250 UCITS ETF GBP (HMCX) |  | 14.89% | 12.96% | Invest with XTBCapital at risk |
| iShares FTSE 250 UCITS ETF (MIDD) |  | 14.70% | 12.80% | Invest with eToroCapital at risk |
| Fund | Icon | 5-year performance (to July 2024) | 1-year performance (to July 2024) | Link to invest |
|---|---|---|---|---|
| iShares Core FTSE 100 (CUKX) | | 28.82% | 12.49% | Invest with eToroCapital at risk |
| Xtrackers FTSE 100 (XDUK) | | 28.66% | 12.42% | Invest with HLCapital at risk |
| Invesco FTSE 100 (S100) | | 28.41% | 12.19% | Invest with HLCapital at risk |
| HSBC FTSE 100 (HUKX) | | 7.30% | 8.35% | Invest with XTBCapital at risk |
| Vanguard FTSE 100 (VUKE) | | 6.27% | 7.89% | Invest with XTBCapital at risk |
| iShares Core FTSE 100 (Dist)(ISF) | | 6.21% | 7.94% | Invest with XTBCapital at risk |
| Amundi FTSE 100 (100D) |  | 6.14% | 8.81% | Invest with HLCapital at risk |
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.
Typically, the FTSE 100 is “better” because it’s got the highest stocks by market cap in the London Stock Exchange, but the FTSE 250 has more stocks in it and has historically had slightly better growth – so as an investment, it really depends on what you’re looking for.
There’s also no reason why you can’t invest in both. You’d get more diversification as you’d be investing in 350 companies. You’d do this by investing in a FTSE 350 index fund.
| FTSE 250 | |
|---|---|
 | Centrica |
 | Tritax |
 | Unite Group |
 | Harbour Energy |
 | Convatec |
| FTSE 100 | |
|---|---|
 | AstraZeneca |
 | Unilever |
| HSBC Holdings |
 | Diageo |
 | GlaxoSmithKline |
These trading apps allow you to invest in companies within the indexes directly or to invest in funds and ETFs.
The FTSE 100 and FTSE 250 serve as key indicators of the UK stock market, including everything from miners, banks, tobacco makers, banks to High Street chains and real estate. While not quite as exciting as their high-tech American counterparts, they offer stability. Both pay dividends, with the FTSE 100 having a slightly higher yield at 3.8% compared to the FTSE 250’s 3.4%.
The FTSE 100’s global exposure leaves it better prepared to weather UK recessions, with significant revenues coming from overseas. In contrast, the FTSE 250 is more tied to the UK economy’s ups and downs. On the other hand, the FTSE 250 has historically had slightly better growth, because its smaller constituents are scrappier and have more runway starting from a lower base.
If you can’t decide between the 2 indices, you can always opt for a FTSE 350 index fund, which rolls them into one.
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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