FTSE 100 Index Explained

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FTSE 100 Index Explained

Market Commentary 31510
May, 2020 Data:

Part 1: SUMMARY RETURNS & RANK
Last Month -2.3% Rank: 2 out of 23
Last Year . . . . . . . . . . . . . . . . -6.0% Rank: 17 out of 23
Last 5 Years 5.5% Rank: 21 out of 23
Last 10 Years . . . . . . . . . . . . 63.4% Rank: 19 out of 23

Returns for the FTSE 100 Stock Index is shown above for four time periods. For
example: the change in the FTSE 100 Index was -2.3% in the last month. With
that return, the FTSE 100 Index was ranked 2nd out of the 23 indexes reviewed
in this site for that time period. Dividends are not included.

Part 2: HISTORICAL HIGHLIGHTS
The performance ranking of the FTSE 100 Index relative to the other 23 stock
indexes covered in this site is detailed below. Four different time periods are
reviewed. The FTSE 100 Stock Index is compared to foreign and domestic,
large cap and small cap indexes. Each paragraph identifies the top and bottom
performers as well as the average and median market performance for the
indexes during in each time period.

Last Month:
During May of 2020, the FTSE 100 had a rank of 2 with a return of -2.26%. The
top ranked index during May was the Dow Utility Index, with a return of 0.16%.
The worst performing index during that period was the Hang Seng Index with a
return of -8.70%.
The median return for all stock market indexes during May was -4.75%. The
average return for the indexes during the month was -4.91%.

Last Year:
During the last 12 months, the FTSE 100 had a rank of 17 with a return of -6%.
The top ranked index during the last year was the Dow Utility Index, with a
return of 12%. The worst performing index during that period was the Hang
Seng Index with a return of -11%.
The median return for the indexes during this period was -1%. The average
return for all stock market indexes over the year was -2%.

Last 5 Years:
Over the 5 years ended May of 2020, the FTSE 100 had a rank of 21 with a
return of 5%. The top ranked index during the 5 year period was the NASDAQ
100 Index, with a return of 94%. The worst performing index during that period
was the Straits Times Stock Index with a return of -5%.
The median return for all stock market indexes during this time period was 33%.
The average return for the indexes over the 5 years was 31%.

Last 10 Years:
During the 10 years ended May of 2020, the FTSE 100 had a rank of 19 with a
return of 63%. The top ranked index during the period was the NASDAQ 100
Index, with a return of 405%. The worst performing index during the 10 year
time period was the Straits Times Stock Index with a return of 35%.
The median return for the indexes during the last 10 years was 188%. The
average return for all stock market indexes over that time frame was 156%.

All calculations are based on the monthly market close for each index, excluding
dividends.

What Is the FTSE 100?

FTSE 100 Index

The Financial Times Stock Exchange 100 Index, also known as the FTSE 100 Index and “Footsie”, is as you probably worked out, a stock market index. It is composed of the 100 largest companies listed on the London Stock Exchange (LSE).

The London Stock Exchange is open from 8am-4:30pm local time (GMT) on weekdays.

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Stocks on the index are sorted by market capitalization. In case you are unfamiliar with this term—the market capitalization of a stock is determined by multiplying the number of outstanding shares by the price of a single share. Essentially, giving us the current trading price for a company.

Some of the biggest companies included on the FTSE 100 are HSBC Holdings, Royal Dutch Shell, BP, British American Tobacco and GlaxoSmithKline.

Stock exchange indexes

Stock exchange index’s measure the performance of their relevant stock markets and there are a few index’s you should be aware of in the UK and US markets.

The major stock market indexs

The FTSE 100 is an index comprised of the top 100 companies in the UK and stands for Financial Times Stock Exchange. The 100 companies are rated by how highly they capitalise the market. Capatalisation is measured by the (number of shares in issue X the share price).

The companies in FTSE 100 represent around 80% of the whole London Stock Exchange. this resulting in the FTSE 100 being a very accurate indicator of the UK market.

The FTSE 100 is a very strong indicator of the market and therefore it should always be taken into account when buying shares. If the FTSE 100 is down by e.g. 1% in the day then it is very likely that you shouldn’t be buying shares and vica versa.

The FTSE 250 is an index compromising of the top 250 companies outside of the FTSE 100 (Shares 101-350). Like the FTSE 100 the 250 companies are measured on market capitalisation.

The FTSE 100 and 250 together make the FTSE 350 index.

Shares in the FTSE 250 index are often more volatile than the FTSE 100 index due to their smaller market capitalisation. Therefore they can produce bigger profits and losses. Some shares in the FTSE 250 can be risky due to their low volume per trading day.

The Dow Jones Industrial Average (DJIA or DJ30)

The DJ30 (Dow Jones 30) is the US equivalent to the UK’s FTSE 100 index and lists 30 of the biggest US industrial companies. The 30 companies in the DJ30 represent about 20% of all US stocks consequently providing an reasonable representation of which way the market is heading but a very accurate representation of the direction of US industrial stocks.

Well known stocks include McDonalds, Walmart and Walt Disney.

The Standard and Poor’s 500, like the DJ30 is also an index. The index consists 500 of the most widely held blue chip stocks in the US. It is considered as the benchmark for the US stock market an is also important for blue chip traders to determine the overall performance of the big US companies.

The NASDAQ stock exchange also provides its own index, the NASDAQ 100. Like the FTSE 100, the NASDAQ 100 lists the 100 most capitalised stocks in the NASDAQ stock exchange.

NASDAQ 100 stock are technology based and include Apple, Microsoft and Yahoo.

Stocks listed on the NASDAQ are often slightly more volatile than other stocks, therefore they can enable you to make bigger profits or losses.

Note: If you want to trade indexs rather than individual stocks then check out ETF’s (exchange traded funds).

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