The FTSE 100 or “Footsie” is one of the most prestigious stock indices worldwide. It comprises the 100 largest UK companies by value. It measures the performance of businesses regulated by company law in the UK.
All FTSE UK Indices undergo a quarterly review, specifically in March, June, September, and December. Ranking occurs in order of full market capitalisation or value. For the FTSE 100 index, the London Stock Exchange will add a company if its rank has risen to 90th or above.
Conversely, a company will exit the index if its rank falls to 111th or lower. According to FTSE Russell, a global indices provider, there were three exits and three entries in the latest quarterly review based on market values on 28th November 2021. Those exits and entries took effect from Monday 18th December.
Interpreting the FTSE
The FTSE index is a quick snapshot of the UK stock market. You can assess the UK stock market using it because its component companies account for a large percentage of the Kingdom’s total equity market value.
When the index rises, more people like you buy shares in the broader market. However, people are happily dumping shares they deem to be losing or have lost value when it’s down.
Note that the FTSE doesn’t give a clear idea of the performance of the general UK economy. The reason is that most FTSE 100-listed companies have a strong footprint on the international market. As a result, the FTSE 250 index is a better gauge for UK economy health.
Best FTSE 100 Stocks to Invest in
Best Stocks by Growth
As of 6th January 2022, the best FTSE 100 stocks by growth include:
- Standard Chartered (LSE: STAN)
- Lloyds (LSE: LLOY)
- HSBC Holding (LSE: HSBA)
Best Stocks by Stock Stability
As of 6th January 2022, the best FTSE 100 stocks by stock stability include:
- Glencore Holding
Best Stocks by Investment Stability
Here are the best stocks by investment stability.
#1 – Rolls-Royce (LSE: RR)
In the stock market, they say “speculate to accumulate.” Industrial giant Rolls-Royce makes hi-tech turbine engines for ships and aircraft. But, you’re likely more interested in if its potential as an industrial goldmine.
Rolls-Royce’s customers consist of airlines, military forces, and governments worldwide, making it a safe investment bet. With airlines picking up steam in the wake of COVID-19, you can expect RR share prices to soar again like they’re known to.
#2 – Reckitt Benckiser (LSE: RKT)
Long-term buy-and-hold investing works well with consumer-oriented brands such as Reckitt Benkiser, delivering growing income and steady capital growth for you.
This company is dealing with a few headwinds at the moment, promising to perform even better than other heavyweights such as Diageo (LSE: DGE) and Unilever (LSE: ULVR).
Business indeed boomed for Reckitt during the pandemic as sales grew for cleaning agents, disinfectants, and sanitisers.
The company has a record of delivering a rising dividend and will rely on brand economics to keep going.
#3 – AstraZeneca (LSE: AZN)
The healthcare and pharmaceutical industries have made a resurgence since the coronavirus arrived on our planet. AstraZeneca is now, by default, the stock of choice in the pharmaceutical space. You may have thought GlaxoSmithKline (LSE: GSK), but since it’s now two firms – a consumer brands firm and a pharmaceutical operation – it could take a while to see significant dividends.
AstraZeneca’snew CEO, Pascal Soriot, is steadily delivering shareholder value alongside a steady dividend. This tradition will continue along as the company maintains its strong innovation and focus on therapeutics.
Investment Opportunities and Threats
You’re probably wondering if you can make money through direct investment into the FTSE 100. Unfortunately, that’s not possible; however, you can buy an investment that tracks its performance. Such investments are known as trackers.
Trackers may be tracker funds or exchange-traded funds. Commonly traded FTSE 100 ETFs include DBX FTSE 100 (LSE:XUKX), iShares FTSE 100 (LSE: ISF), and HSBC FTSE 100 ETF (EPA: UKX).
American Depository Receipts (ADRs) offer the best means for US investors to gain exposure to the FTSE 100. ADRs include HSBC Holdings (NYSE: HBC), Unilever Plc. (NYSE: UL), and Vodaforne Group (NASQAD: VOD).
UK Earnings Session
However, the FTSE 100 is not immune to all the perils of modern investing. It’s known to swing quite a bit during earnings sessions, the needle tending to move higher on positive earnings report of listed companies. Conversely, it also moves downward when these companies turn in negative numbers.
The index is vulnerable to earnings reports from the UK’s top banks, offering clear insight into the overall economy.
Being the UK’s biggest trading partner, the EU has a significant impact on the most prominent players in the UK stock market.
The bloc’s geopolitical and economic tensions invariably have a multiplier effect on FTSE stock performance.
The direction in which the FTSE100 trades usually depends on economic releases. Such reports include rate hike decisions, UK GDP data, and manufacturing data.
The FTSE 100 is a significant stock market index to watch if you’re interested in the UK financial markets. There are, of course, multiple fundamentals to track, but the companies on it are big companies that you can reap huge dividends from investing in.
The quarterly index update makes the FTSE 100 a reliable reflection of the UK stock market.
Note: Please do not invest money or assets in the financial markets that you cannot afford to lose. This article should not be construed to be investment advice and is for information purposes only.