FTSE 100 Explained — The UK’s Premier Stock Market Index
What Is the FTSE 100?
Launched on January 3, 1984, with a base value of 1,000, the FTSE 100 was created by FTSE Group (a joint venture between the Financial Times and the London Stock Exchange, now owned by the London Stock Exchange Group). The index covers the 100 largest UK-listed companies, reviewed quarterly in March, June, September, and December.
Despite being a “UK” index, the FTSE 100 is surprisingly international. Its constituent companies earn roughly 75% of their revenue from outside the UK. Giants like Shell, HSBC, Unilever, AstraZeneca, and BP are global multinationals that happen to be listed in London. This makes the FTSE 100 more of a global large-cap index denominated in British pounds than a pure play on the UK domestic economy.
Top FTSE 100 Companies
| Company | Sector | Approx. Weight |
|---|---|---|
| AstraZeneca | Healthcare | ~10% |
| Shell | Energy | ~8% |
| HSBC | Financials | ~6% |
| Unilever | Consumer Staples | ~5% |
| BP | Energy | ~3% |
| Rio Tinto | Materials | ~3% |
| GSK | Healthcare | ~3% |
| Diageo | Consumer Staples | ~3% |
| British American Tobacco | Consumer Staples | ~2.5% |
| Barclays | Financials | ~2% |
Sector Breakdown
The FTSE 100 has a very different sector mix than the S&P 500. It’s much heavier in energy, financials, materials, and consumer staples — and notably light on technology. This “old economy” tilt explains why the FTSE 100 has significantly underperformed the S&P 500 over the past decade as U.S. tech drove returns.
| Sector | FTSE 100 Weight | S&P 500 Weight |
|---|---|---|
| Financials | ~18% | ~13% |
| Energy | ~13% | ~3.5% |
| Healthcare | ~14% | ~12% |
| Consumer Staples | ~14% | ~6% |
| Materials | ~8% | ~2.5% |
| Technology | ~1% | ~31% |
| Industrials | ~10% | ~8% |
How to Invest in the FTSE 100
For U.S. investors, the iShares MSCI United Kingdom ETF (EWU) provides broad UK equity exposure (not limited to the FTSE 100 but heavily overlapping). UK-based investors typically use the Vanguard FTSE 100 UCITS ETF or iShares Core FTSE 100 UCITS ETF. These funds have very low expense ratios, typically 0.07–0.09%.
Key Takeaways
- The FTSE 100 tracks the 100 largest companies on the London Stock Exchange — it’s the UK’s flagship equity benchmark.
- Despite the UK listing, ~75% of FTSE 100 revenue comes from outside the UK, making it a global index in practice.
- The sector mix is heavy on energy, financials, and consumer staples — and very light on technology (~1%).
- This “old economy” composition explains its underperformance vs. the tech-heavy S&P 500 over the past decade.
- Currency movements between GBP and USD significantly impact returns for cross-border investors.
Frequently Asked Questions
Why has the FTSE 100 underperformed the S&P 500?
The primary reason is sector composition. The FTSE 100 has almost no technology exposure (~1%) while the S&P 500 is ~31% tech. The massive rally in U.S. tech stocks over the past decade has driven the S&P 500 far ahead. The FTSE 100’s heavy weighting in slower-growing sectors like energy and consumer staples has limited its upside.
Is the FTSE 100 a good indicator of the UK economy?
Not really. Because FTSE 100 companies earn most of their revenue internationally, the index tells you more about the global economy than the UK domestic economy. For a better read on the UK economy, analysts look at the FTSE 250 — the next 250 largest UK-listed companies, which are more domestically focused.
What is the FTSE 250?
The FTSE 250 includes companies ranked 101–350 by market cap on the London Stock Exchange. These mid-cap companies are more UK-focused in their revenue. The FTSE 250 is considered a better barometer of the UK domestic economy and has actually outperformed the FTSE 100 over long periods.
How does the FTSE 100 compare to European indexes?
The FTSE 100 is the largest single-country European index. The Euro Stoxx 50 covers the 50 largest Eurozone companies (excluding the UK). Germany’s DAX 40, France’s CAC 40, and the FTSE 100 are the three most-followed European national indexes.
Can a non-UK company be in the FTSE 100?
Yes — the requirement is that the company is listed on the London Stock Exchange and meets FTSE Russell’s nationality criteria. Many FTSE 100 companies are incorporated outside the UK but maintain a primary LSE listing. Shell, for example, is a British company headquartered in London but with global operations.