© 2019 Bluecoat Wealth Management

Decisions should not be taken based solely on the content of this website, individual advice should be taken first. Content is aimed at UK residents.

Bluecoat Wealth Management is an appointed representative of Best Practice IFA Group, which is authorised and regulated by the Financial Conduct Authority (FCA), FCA no. 223112. Registered Office: 11 Lady Bee Enterprise Centre, Albion Street, Southwick BN42 4BW. Registered in England and Wales no. 6828686. The Financial Ombudsman Service (FOS) is available to sort out individual complaints that financial services businesses and their clients are unable to resolve. To contact FOS please visit www.financial-ombudsman.org.uk

Please reload

Recent Posts

The current renewed volatility in financial markets is reviving unwelcome feelings among many investors—feelings of anxiety, fear and a sense of power...

Living with volatility

November 24, 2011

1/1
Please reload

Featured Posts

Understanding what goes in to the FTSE100

August 9, 2018

 

 

 

The latest quarterly review of the FTSE 100 revealed common misunderstandings about how the index is drawn up.

 

Every quarter FTSE Russell, which operates all the FTSE indices, decides which companies are promoted or demoted from the FTSE 100 index.

 

There had been speculation that the June review would see Marks & Spencer (M&S) replaced by Ocado. The high street chain has been a member of the Footsie since the index first appeared in 1984, so for the bricks and mortar shopping experience to be supplanted by an online-only retailer that did not arrive on the stock market until 2010 made for a good headline.

 

However, M&S did not check out of the FTSE100 and survives until the next quarterly review. What the journalists missed is that a company listed in the FTSE 100 is only ejected if its ranking drops below 110. Similarly, promotion into the FTSE100 requires a ranking of 90 or higher.

 

These rules are designed to avoid a large quarterly churn at the bottom tier of the index, and it works – only one other company, GVC Holdings, entered the index in June.

 

GVC is gaming company, based in the Isle of Man and listed in London. The main reason it entered the FTSE100 was that it took over a more familiar betting name, Ladbrokes Coral. To do so, GVC issued more shares and thus increased its all-important market capitalisation.

 

June’s changes to the FTSE100 remind us that the construction and operation of stock market indices are not as simple as might be imagined. Whether you are considering investing in an index tracker fund or comparing fund performance against an index, it is a point to remember.

 

The value of your investment can go down as well as up and you may not get back the full amount you invested.

 

Past performance is not a reliable indicator of future performance.

 

Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.

Please reload

Follow Us
Please reload

Search By Tags