In 1984, a subsidiary of the London Stock Exchange Group opted to launch a share index known as the Financial Times Stock Exchange 100 Index. It’s now commonly known as the FTSE 100 and is maintained by the FTSE Group based at 10 Upper Bank Street, London.
Since its launch on the London Stock Exchange on 3rd January 1984, it has been used as a benchmark for the performance of the most influential companies operating in the UK economy. That’s because the index consists of the top 100 companies listed on the LSE ranked by market capitalisation. The market cap of a company is determined by multiplying the share price of an individual share by the total number of shares issued.
What is the London Stock Exchange?
The London Stock Exchange is one of the most valuable stock markets on the planet. Situated in the City of London, as of August 2022, its total market capitalisation was worth £1.93 trillion. Essentially, that means the value of all the companies listed on the exchange is £1.93 trillion. That means the London Stock Exchange is big business and a prime indicator of not just the UK economy but the European and global economies too.
The FTSE 100 index is one of five indices within the London Stock Exchange and we’re going to look in greater detail at how the “Footsie” 100 works as well as its annual performance since its launch.
Why should you care about the FTSE 100?
The FTSE 100 index provides you with a single value which equates to the combined value of listed companies within the index. If some of the most valuable companies within the FTSE 100 experience difficult times commercially, resulting in their share price falling, this is likely to cause the FTSE 100 index price to fall, too.
The price of the FTSE 100 index bounces up and down throughout a normal trading day. Retail traders increasingly look for the next big riser in the index. A FTSE 100 riser is a high-growth company. One that’s not just happy being listed within the FTSE 100 index, but has risen the index ranks into one of the most economically influential companies in the UK.
Some of the biggest FTSE 100 risers in recent times include sportswear giant JD Sports, whose share price soared 3,270% between 2010 and 2020, respectively. Property platform Rightmove was another leading FTSE 100 riser, with its share price offering investor returns of 1,020% between 2010 and 2020.
In general terms, the FTSE 100 index is a benchmark for the general health of the financial markets. As the index contains companies across a broad spectrum of industries, the rise and fall of significant conglomerates can tell us a great deal about the confidence in the market. Sharp declines in the FTSE 100 have often indicated an impending recession. It fell over 2,400 points between February and March 2020 as the onset of the Covid-19 pandemic and the worldwide lockdowns ensued.
Anyone can buy into the FTSE 100 index. Some pension funds will include the FTSE 100 as a solid and dependable option given that the index has turned a profit in 11 of the last 20 years.