Definition of FTSE Indexes
The FTSE Indexes, created by FTSE Russell, a subsidiary of the London Stock Exchange Group, are a collection of stock market indices designed to gauge the performance of various segments of the UK market. These indices serve as benchmarks for the UK economy, tracking companies listed on the London Stock Exchange (LSE). Notable indices in this series include the FTSE 100, FTSE 250, FTSE 350, and FTSE All-Share Index.
Key FTSE Indices
- FTSE 100: Represents the 100 largest companies by market capitalization listed on the LSE. Often regarded as a barometer for the UK economy.
- FTSE 250: Tracks the 250 companies following the FTSE 100 in terms of market capitalization. It provides insights into the mid-cap segment.
- FTSE 350: A combination of the FTSE 100 and FTSE 250, encompassing the 350 largest companies listed on the LSE.
- FTSE All-Share Index: Covers almost all companies listed on the LSE, providing a comprehensive view of the UK equity market.
Examples of Usage
- Investment Benchmarking: Financial advisors and investors frequently use the FTSE 100 as a benchmark to evaluate the performance of UK-based investment portfolios.
- Economic Indicators: The FTSE 100 and FTSE 250 are used to gauge economic health and investor sentiment toward the UK market.
- Index Funds and ETFs: Various index funds and ETFs track the FTSE indices, allowing investors to gain exposure to a diversified portfolio of UK stocks.
Frequently Asked Questions (FAQs)
1. What is the FTSE 100 Index?
The FTSE 100 Index measures the performance of the 100 largest companies by market capitalization listed on the London Stock Exchange. It is often seen as an indicator of the overall health of the UK stock market and economy.
2. How often are the FTSE indices rebalanced?
FTSE indices are typically rebalanced quarterly. This involves adding and removing companies to reflect changes in their market capitalizations and ensure the indices remain representative of their respective market segments.
3. Can foreign companies be included in the FTSE indices?
Yes, foreign companies can be included in the FTSE indices if they are listed on the London Stock Exchange and meet specific criteria set by FTSE Russell.
4. How can I invest in FTSE Indexes?
Investors can gain exposure to FTSE indices through index funds and ETFs that track these indices. These financial products aim to replicate the performance of the underlying index by holding a portfolio of stocks that match the index’s composition.
5. What is the difference between the FTSE 100 and FTSE 250?
The FTSE 100 tracks the 100 largest companies listed on the LSE by market capitalization, whereas the FTSE 250 monitors the next 250 largest companies. Together, they form the FTSE 350 Index.
Related Terms
- Market Capitalization: The total market value of a company’s outstanding shares. It is calculated by multiplying the current share price by the number of outstanding shares.
- London Stock Exchange (LSE): One of the world’s oldest and largest stock exchanges, located in London, United Kingdom.
- Index Fund: A type of mutual fund designed to track the components of a market index such as the FTSE 100 or FTSE 250.
- Exchange-Traded Fund (ETF): A type of investment fund and exchange-traded product that tracks an index and trades on an exchange like a stock.
Online References
- FTSE Russell - Official site for FTSE indices and detailed information.
- London Stock Exchange - Information on companies listed on the LSE and market data.
- Investopedia - FTSE 100 Definition - Detailed explanation and insights about the FTSE 100.
Suggested Books for Further Studies
- “The Intelligent Investor” by Benjamin Graham - A fundamental guide to investment philosophy and strategy.
- “A Random Walk Down Wall Street” by Burton G. Malkiel - Provides insights into various investment strategies and the importance of index funds.
- “Common Stocks and Uncommon Profits” by Philip Fisher - Explores long-term investment and stock market analysis techniques.
Accounting Basics: “FTSE Indexes” Fundamentals Quiz
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