FTSE 100 Index – What is it?
The index traces the value of the 100 largest companies in the UK trading on the stock exchange.
The name is pronounced ‘footsie one hundred’.
A simplified history
From the start of the index, the general movement was up. Although it has had a few falls in value, it has risen from approximately 2400 to over 7400. This is an increase of almost 210%. In simple terms the index is worth 3 times the value it was in 1984.
Right up until the Dot Com Bubble peak and then ‘burst’ at the end of the 1990’s the value of the index rose considerably more than it fell.
Markets recovered slowly, but then returned to form and grew relatively steadily.
In 2007 the banking crisis shook the whole world and the index reflects this. The credit crunch caused a low point in 2009.
Since the low in 2009 the index moved generally upwards and hit the high of over 7400.
The last 12 months
Following the Brexit referendum the Bank of England lowered interest rates to 0.25%, the lowest in 300 years.
This low rate of return on the pound has caused the pound to become weak against both the US Dollar and the Euro.
With the Pound being weak against these currencies, our exports became attractive and investment became cheaper for foreign investors.
This increase in exports being sold and new investment into our companies created strong growth in UK markets in spite of the uncertainty of Brexit looming.
Investing in the FTSE
In terms of the available investments, many equity funds invest in the companies with the FTSE 100 index, however they are not required to do so unless the fund is a FTSE Tracker fund, which aims to hold assets in the majority of the companies in the FTSE index to reflect the performance of the index.