What is FTSE 100?

The FTSE 100 is a popular and widely listed and traded market index. Equity indices are used to measure the performance of companies governed by UK company law. The index measures the performance of some of the largest companies by market capitalization. The full name of the FTSE 100 is the Financial Times Stock Exchange 100, sometimes shortened to FTSE or pronounced "Footsie". The index was created in 1984 as a joint venture between the London Stock Exchange and the Financial Times. The acronym FTSE dates back to when the Financial Times and the London Stock Exchange owned the index 50/50, so FT and SE form the FTSE name.

Stock exchange runs other indexes in addition to the FTSE 100, such as FTSE 250 and FTSE 350 all of which paint a unique picture of the overall stock market. The FTSE 100 lists the top 100 companies by market cap, listed on the London Stock Exchange. The index seeks to provide a quick snapshot of the U.K stock market given its components which account for a huge percentage of the Kingdom’s total equity market value. For this reason, if the index is up, it means most people in the broader market are buying shares, and when it is down, it means people are dumping shares.

Given that most of the companies listed in the FTSE 100 have vast operations overseas, the index does not paint a clear picture of how the U.K economy is performing. The FTSE 250 Index is one that is commonly used to gauge the health of the U.K economy given that it contains a small portion of internationally focused companies. Just like other financial indexes around the world, FTSE 1000 is simply a measurement of the overall stock market in the U.K. Given the type of companies listed, and the index is commonly used to ascertain how various market segments are performing.

When the FTSE 100 came into being in 1984, it started at a notional value of 1,000 points. Over the years, the number has experienced swings based on the performance of the companies listed. Given that, the index is currently trading at about 7,000, it means that U.K top 100 companies have grown by more or less 600% over time.