What is The FTSE 100?

Written by on September 21, 2012 in Money - No comments | Print this page

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The FTSE 100 is a term frequently used within the news and literature concerned with the financial market. It stands for the Financial Times Stock Exchange 100 and, essentially, is an index of the hundred largest businesses in the UK stock exchange. Companies featured in the FTSE 100 include banking groups such as Barclays and Lloyds TSB; fashion brand Burberry; supermarket groups including Sainsbury’s and Marks and Spencer’s; and mobile giant Vodafone.

The purpose of FTSE 100 is to provide an at-a-glance guide of how the stock market is performing. This is because knowing the general performance level of the hundred largest UK companies provides a good indication of the stock market as a whole.

The companies, which are components of the FTSE 100, are generally large, established firms, and as such can be considered relatively low-risk in regards to investment opportunities. Buying even small shares in businesses of this type will often result in financial gain, because as long as the company makes a profit this shall be shared amongst the shareholders through dividends twice a year. As is to be expected however, payouts will be smaller in successful companies that have many shareholders.

Investors seeking more ambitious profit gain could partake in spread betting on the future prices of the FTSE 100. This is a riskier method of betting but can result in larger financial success. The process requires excellent observation of previous trends and strategic thinking around what is likely to happen to the price of shares in the future.

Whether buying ordinary shares or spread betting, most investors will use the services of a stockbroker. Brokers are the people who shares are bought and sold by on behalf of their investing client. They can advise clients on when best to buy and sell shares for the most financial gain. One way in which people can attempt to predict the future price of shares, including those on the FTSE 100, is through sentiment analysis.

This involves analyzing the language being used by people on blogs, in articles and on social media sites concerning one topic. It monitors the use of positive and negative language to deduce the mood surrounding that topic. Much success in the stock market stems from gut instinct and feeling, therefore analyzing how others in the market are feeling about certain shares can be extremely beneficial.

An understanding of how the FTSE 100 works, and what other processes are involved in buying and selling shares, are invaluable for anybody wishing to become involved in the stock market.

This is a guest post.  Adam has been a keen blogger and article writer for FTSE 100 share news and spread betting for the past 2 years, focusing on twitter sentiments for the past few months.

Image by watcharakun: FreeDigitalPhotos.net

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