Stock index: FTSE 100 stocks

The FTSE 100 at a glance

The Financial Times Stock Exchange (FTSE) 100 Index was introduced on January 3, 1984, with an index base of 1,000 points and retroactively calculated back to the year 1969.

The index includes companies based in the United Kingdom that are listed on the London Stock Exchange. The index is calculated and managed by the British company FTSE Group.

The FTSE 100 is unlike the German DAX in that it is a price index. This means that, for example, dividend payments from companies in the index do not affect the index's price.

Weighting of the FTSE 100

The companies in the index vary in size and therefore have different significance for the British economy. For this reason, the companies are weighted based on their market capitalization. This means that larger companies have a greater influence on the index than smaller ones. This system is applied to all modern indices. The composition of the FTSE 100 is reviewed quarterly.

With a share of approximately 17% each, companies from the financial and basic consumer goods industries account for the most valuable share in the index. The smallest sectors are real estate and technology, both of which have a share of only about 1.3%.

The largest company in the index is the vaccine manufacturer Astrazeneca with a market capitalization of approximately 155 billion euros. At the other end of this list is the company Pearson PLC, which is only worth 5.4 billion euros on the stock exchange.

The most well-known companies from the FTSE 100.

There are several companies from the FTSE 100 that have worldwide recognition. This includes, for example, the company Astrazeneca, which became known primarily for its COVID-19 vaccine.

The internationally operating major banks HSBC, Barclays, and Lloyds Banking Group are also well-known to many people.

The investment fund of Bill Ackman (Pershing Square Holdings) included in the FTSE 100 is at least very well known among investors. This fund achieved high profits during the financial crisis and the Corona crash.

Furthermore, the oil corporations BP and Royal Dutch Shell, as well as the food producer Unilever, are well-known companies from the FTSE 100.

The annual development of the FTSE 100

After the introduction of the British index in 1984, it was able to increase by an average of 13.76% per year in the first ten years. However, in the last ten years, the index has only increased by 1.43% per year. This is very low compared to other indices. The American S&P500 and the global MSCI World achieved annual returns of well over 8%. The main reason for this is the uncertainty caused by Brexit. The withdrawal from the EU represented a very large economic risk. This also had an impact on the development of stock prices.

What is important for individual investors?

If an investor had invested $1,000 in this index in 1984, it would be worth $7,500 today. This corresponds to an annual return of 6.4%. In comparison, the American S&P 500 achieves long-term returns of 10% per year.

In the UK, there are many quality companies. These have performed well in the past and are likely to do so in the future.

However, an investment in an ETF tracking the entire index should be carefully considered. The long-term consequences of Brexit are still unknown, but pose a high risk. In the past, investors have achieved significantly higher returns with lower risk by investing in a global index, such as the MSCI World.