How to invest in the FTSE 100 - Stocks, ETFs | Finder UK (2024)

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 index, and how to start investing in the FTSE 100.

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 fund or ETF, you’ll need to open a share trading account.
2. Fund your account. The next step is depositing money into your account to buy shares or invest in a fund, either by bank transfer or using a debit card.
3. Choose your FTSE 100 investments. Either select a FTSE 100 fund or, if you want to buy shares, research the individual companies you’re considering. Once you know what you want, find the FTSE 100 stocks on your platform.
4. Hit buy. It’s as simple as that.

What is the FTSE 100?

The Financial Times Stock Exchange 100 (FTSE 100 for short, sometimes referred to as the “footsie”) 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?

Yes, but not directly. Many experts talk about investing in the FTSE 100, but it’s not actually an investment fund, it’s an index. Think of an index as a hypothetical portfolio, designed to monitor the performance of the assets it contains (in this case, large-cap UK stocks). As such, you can’t actually invest directly in the FTSE 100.

However, you can gain exposure to the whole FTSE 100 list and companies in the index by either buying shares in each individual firm or by investing in a fund – such as an exchange-traded fund (ETF) or index fund – that tracks the performance of the FTSE 100 index.

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 shares 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 each stock (and avoiding trading fees), you could instead invest in a FTSE 100 fund or ETF. These track the performance of all the current stocks in the FTSE 100.

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FTSE 100 performance

You can use the chart below to track the performance of the FTSE 100:

Here’s a list of the top constituents in the FTSE 100 by market cap. These top FTSE shares will shift regularly as the market moves. If you were to invest in a FTSE 100 fund or ETF, the bulk of your investment will go to these shares:

1. Shell (SHEL)
2. AstraZeneca (AZN)
3. HSBC (HSBA)
4. Unilever (ULVR)
5. BP (BP)
6. GSK (GSK)
7. Relx (REL)
8. Diageo (DGE)
9. Rio Tinto (RIO)
10. British American Tobacco (BATS)

This table below shows you all the FTSE 100 shares that have recently seen a big change in trading volume. This refers to the total number of shares being bought or sold over a monthly period.

How do FTSE 100 ETFs work?

A FTSE 100 ETF is traded on stock exchanges. So unlike funds, the price can fluctuate throughout trading hours. Generally, ETFs are cheaper to run than funds (which is why they have low ongoing fees).

An ETF tracking the FTSE 100 also tends to be cheap because it doesn’t require much oversight. The FTSE 100 index is maintained by FTSE Russell and it’s reviewed each quarter. FTSE 100 ETFs should automatically adjust to reflect any changes.

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.

The ETF’s 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%. Your fund returns may be slightly less than the index price returns after investment charges are deducted.

Types of ETFs

Here’s a quick summary of the main types of FTSE 100 ETFs you’ll come across:

• Market cap weighted ETFs. Most FTSE 100 ETFs will be market-cap weighted and track the performance of the index, meaning the fund is weighted more towards the companies with higher market capitalisation. However, there are some ETFs organised differently, such as the X-Trackers FTSE 100 Equal Weight UCITS ETF (XFEW). As the name suggests, it invests in all the companies in the FTSE 100 index equally. This means the performance of smaller firms will have as much of an impact as the larger stocks.
• 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 FTSE 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 magnification would apply to losses.

FTSE 100 ETFs

Below are some of the most popular FTSE 100 exchange-traded funds available. They’re ranked by ongoing costs (this should be as low as possible considering each one mirrors the same investments). Just search the stock ticker on your share dealing account, keep in mind not every platform will have every FTSE 100 ETF.

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 (to February 2024)	1-year performance (to February 2024)	Link to invest
	iShares Core FTSE 100 (CUKX)	30.38%	1.94%	Invest with eToroCapital at risk
	Vanguard FTSE 100 (VUKE)	30.29%	1.83%	Invest with XTBCapital at risk
	Xtrackers FTSE 100 (XDUK)	30.05%	1.82%	Capital at risk
	Lyxor FTSE 100 (100D)	29.51%	1.76%	Capital at risk
	Invesco FTSE 100 (S100)	29.48%	1.83%	Capital at risk
	HSBC FTSE 100 (HUKX)	28.63%	0.43%	Capital at risk

Pros and cons of investing in the FTSE 100

Bottom line

The FTSE 100 contains some of the best-known British brands, such as Lloyds, Tesco 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 FTSE 100, which could be a more cost-effective way to get exposure to these stocks. Now that you know how to invest in the FTSE 100 index, make sure you consider the fees involved and that your broker lets you invest in the London Stock Exchange.

Frequently asked questions

• The most straightforward way to invest in FTSE 100 is through an investment fund, such as an ETF or index fund, that tracks the performance of stocks in the index. This option means you won’t own shares directly, but your returns will still reflect the performance of FTSE 100 companies. You can also buy shares in each individual company, but this will be much more laborious and time-consuming than investing in a fund and may incur high share-trading fees.

• The index itself doesn’t pay a dividend but your FTSE 100 fund or ETF will pay dividends because plenty of companies in the index reward investors with income payments. Keep in mind dividends can vary and are not guaranteed.

  When you choose a FTSE 100 fund, you should be able to choose between distribution or accumulation. Distribution means dividends are paid out to you as cash, whereas accumulation means income is rolled back into your investment to compound. If you’re not using a tax-efficient account like a stocks and shares ISA, be aware you may have to pay tax on dividend income that’s paid out to you as cash.

• At the time of writing (June 2023), the FTSE 100 dividend yield is 3.79%. Keep in mind this will fluctuate regularly.

• The FTSE is owned by the London Stock Exchange Group. The FTSE 100 is one of a number of indexes that the FTSE offers and is probably the best known and most widely used. Other popular indexes include the FTSE 250, the FTSE 350 and the FTSE All-Share.

• No. The FTSE 100 is an index. You can invest in an ETF that tracks the FTSE 100.

• To do this, you would need to short either individual stocks on the FTSE 100 or short an index fund that tracks the FTSE 100. Find out more about short selling in our guide.

• The FTSE 100 is the top 100 stocks on the London Stock Exchange, while the FTSE 250 is the top 250. That means that the first 100 stocks of the FTSE 250 are the FTSE 100, plus the next 150 are featured.

• Neither index is better or worse – they’re simply different, as we explain in our full guide on the . The S&P 500 includes more companies, so is statistically more diverse. However, this means it also includes a number of higher-risk stocks than the FTSE 100. The good news is that you don’t have to choose one or the other to invest in. Instead, why not split your investment across 2 funds – one tracking the FTSE 100 and one tracking the S&P 500?