What is the FTSE 100 Index?

The FTSE 100 Index, informally known as the Footsie 100, is a widely used stock market index based on the London Stock Exchange. Covering a broad range of industries, the FTSE 100 Index is made up of the 100 biggest UK-based companies and provides functions similar to other popular stock indexes, like the Dow Jones Industrial Average in the US. The FTSE 100 provides a quick, real-time snapshot of the action of UK shares, a historical record of how the stocks and economy have fared since the index's creation, and multiple investment options for investors and speculators.

Owned by the Financial Times and the London Stock Exchange, the FTSE 100 was introduced on 3 January 1984 to succeed the FT 30, an index of 30 leading stocks that had been used since 1935. The FTSE 100, which has ranged from 1,000 at its opening to an all-time high of 6,950 in 1999, serves as a quick way to get a reading of the day's market action on the London exchange because it represents much of the exchange's capitalization. In 2010, the index accounted for more than 85 percent of the UK's market capitalization. Companies on the FTSE 100 with the largest capitalizations make up a proportionately larger part of the index; the top 10 companies account for about half the index's price.

The index's price is updated every 15 seconds in real time. The FTSE 100 is the most widely used of the many FTSE indexes, which include the FTSE 250; the FTSE 350, which combines the top companies in the FTSE 100 and the FTSE 250; and the FTSE All-Share Index. The FTSE 100 index can be followed on most major financial news sites.

Besides offering a timely gauge of how the London Stock Exchange is doing, the FTSE 100, like other indexes, provides a historical gauge of the ups and downs of general stock prices and the overall economy. This record, plotted on charts, may be used by market historians for research. I can also be used by technical analysts trying to predict future market moves by analyzing the waves, patterns, and fluctuations of the past.

The FTSE 100 Index offers many ways for investors and speculators to invest. The main ways of investing in the FTSE include Exchange Traded Funds and unit trusts. Speculators may play changes in the FTSE 100 by buying or selling a variety of options and futures. Some investors like the index because it tracks a broad range of UK companies, thus offering significant diversification and an easy way to mirror the fortunes of major companies on the London exchange.