What is the FTSE “footsie” Index?

coding: Beginner, Equities

The FTSE is basically the name for a set of indices on the London Stock Exchange (LSE) that show how well a set of company stocks are performing. It is a good indication to see how UK based stocks are doing generally by taking these sample snapshots. The FTSE 100 for instance is a sample of the largest 100 companies by their value.

How the FTSE works

• The LSE is essentially a marketplace where people come together to buy and sell shares, all done electronically via some very funky software.
• The “Index” is how this is measured which is a running numerical total which can go up and down, and for most people, up is better.
• A higher total means more money has been invested in the market where as a lower total means more people have been selling and getting their money out.
• As I write this, the FTSE is at 6196 which doesn’t mean much unless you look at if that is higher or lower than in the past, and as you can see from this BBC Chart, it’s dropped a lot in the last few weeks.

What are the different indices?

• FTSE All Share - measures how all the companies on the London Stock Exchange are doing. Tracking this index is a good way of measuring a general trend in the market as it spans all companies and sectors.
• FTSE 100 - measures the largest 100 companies by value, such as Sainsbury’s, BP, and British Airways. These businesses make up around 80% of the entire FTSE and thus is a good measure for how well big business is doing in the UK.
• FTSE 250 - measures the next 250 biggest company based on size and often includes home building companies like Wolsey and FMCG like Unilever. If people have more money to spend on things like houses and luxuries, then this index is one to track.

There are many more markets and many different indices to measure them (e.g. Dow Jones and Nasdaq in the US, and even an AIM market in the UK for smaller companies). All of them work in exactly the same way and measure a set of companies in that country.

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