Global analysts are now forecasting exponential growth for the UK market after the finalisation of Brexit and the coronavirus pandemic. If you’re looking to get in on this action, then this How to Invest in the FTSE 100 UK – Beginner’s Guide will certainly help!
We will cover how to invest and how to trade FTSE 100 UK, the best FTSE 100 stocks and strategies to focus on, the best investing platforms to use, and much, much more.
How to Invest in FTSE 100 UK – Quick Tutorial
If you want to know how to invest in FTSE 100 UK in the shortest amount of time as possible, then follow these quickfire steps:
1. Choose a broker. We recommend FCA-regulated broker eToro as it allows you to invest and trade the FTSE 100 index, stocks, tracker funds, and more.
2. Sign up. You can open an account with eToro in minutes. Fill in some personal details and you’re good to go!
3. Deposit funds. With eToro, the first-time minimum deposit is just $500! You can deposit via bank wire transfer, debit/credit card, or an e-wallet.
4. Invest in FTSE 100! You’re now ready to invest in FTSE 100. Find your market and click trade!
Well done! You’ve just invested in FTSE 100 using the world’s biggest social trading platform that has more than 20 million users.
Step 1: Choose a FTSE 100 Investment Platform
When investing in FTSE 100 stocks, indices or funds the most important decision is choosing the right investing platform.
After all, your platform is your gateway to trading and investing in FTSE 100 so you want it to be easy to use, safe and secure.
In the section below, we discuss some of the best trading platforms and investment apps for the FTSE 100 for you to choose from.
1. eToro – Overall Best Platform to Invest in FTSE 100 with 0% Commission
eToro is probably one of the best platforms for FTSE 100 investing. It has a full range of products to choose from including the FTSE 100 index, FTSE 100 stocks, tracker funds, and the best ETFs. You can also access a full range of other asset classes too.
The best thing about eToro is the fact you can trade 100% commission-free! The platform also offers strong peace of mind as they have more than 20 million users around the world and are authorised and regulated by the Financial Conduct Authority (FCA), ASIC, and CySEC.
Your capital is at risk.
Even though investing in FTSE 100 is 100% commission-free, there are some other fees to know about. For example, the spread is a fee nearly all brokers charge. It is the difference between the buy price and sell price. Spreads on the eToro platform are very competitive.
One of the reasons the eToro platform is so popular all around the world is because of its Copy People feature. This allows you to find other traders and copy their trades at the click of a button! There are also tons of statistics you can filter to find the best person to copy.
Depositing funds with eToro is also commission-free and it’s super simple to get started. The platform is also very easy to use, allowing you to access more than 2,400 global markets including the FTSE 100 (they call it the UK 100)! If you wanted to explore or expand your portfolio further, you could even invest in the S&P 500 UK too, with so many investment options to choose from.
Your capital is at risk.
2. Libertex – Invest in FTSE 100 with Zero Spreads
Libertex has more than 2.9 million clients from more than 120 countries. They offer strong peace of mind when investing as they’ve been around for more than 20 years and are authorised and regulated by CySEC.
With Libertex, you can trade on more than 213+ financial CFD instruments covering stocks, commodities, currencies, and indices like the FTSE 100. Better yet, you can access all of these markets with zero spreads and low commission!
As the broker allows you to perform CFD trading, you can potentially profit from both rising and falling prices. It also means you can trade on margin which allows you to open a larger position using a small deposit. Professional clients can access 100:1 leverage meaning to open a £100,000 position you just need £1,000! So, whether you are looking to invest 1000 pounds or invest £10k, there are solutions for you!
Libertex also provides its traders with the MetaTrader 4 trading platform which comes with full access to the MetaTrader Marketplace for algorithmic trading capabilities. They also have their proprietary, web-based platform which has sentiment indicators and live news.
The minimum deposit is only €100 and you can open an account in just a few minutes. You can also deposit funds through bank transfer, debit/credit cards and e-wallets with customer support on hand from 8 am to 8 pm CET.
Your capital is at risk.
Step 2: Choose How You Want to Invest in the FTSE 100
There are a variety of ways to invest in the FTSE 100. Your chosen method may depend on your style of investing. Are you more of an investor, focused on long term investments, holding positions for a long period of time? Or, are you a short-term trader?
Let’s have a look at some of the options so you can decide!
FTSE 100 Index Trading
The FTSE 100 index, also known as the Financial Times Stock Exchange 100 index, or just the Footsie, is a market index of the largest one hundred companies based on market cap, listed on the London Stock Exchange (LSE).
When trading the fluctuations of the FTSE 100 index it’s important to know the two types – the cash index and the futures index.
- The FTSE 100 cash index represents the current price of the index and is usually quoted from your broker.
- The FTSE 100 futures index represents the price of the futures contract that is traded on the LIFFE futures exchange.
With most brokers nowadays you can trade on both the cash and futures index via CFDs which is popular for FTSE 100 day trading due to good liquidity.
Day trading the FTSE 100 index involves buying and selling the index multiple times during the day going for short-term profits. Day traders would typically use technical analysis tools on low timeframes such as the one hour chart to find short-term swings or turning points in the market. Indices trading is becoming increasingly popular with traders who prefer short term investments.
FTSE 100 Tracker Funds
Learning how to invest in FTSE 100 tracker funds can be quite useful for long-term investors. A FTSE tracker fund is simply a fund that tracks the performance of a FTSE index and are commonly used by financial advisers, as are investment trusts.
While most people are familiar with the FTSE 100 Index, you may also want to know how to invest in FTSE 250 UK Index, another index by FTSE, it’s a FTSE Small Cap Index and there are many others around the world.
Financial services companies such as Vanguard, Fidelity and iShares create tracker funds that aim to track the performance of an index, providing investors with the best way to invest money if you are looking for long-term exposure to the index.
For example, the iShares FTSE 100 UCITS ETF (Dist) tracks the performance of the FTSE 100 Index. The fund itself is listed on a stock exchange, allowing investors to buy shares within it and thereby gaining exposure to the overall performance of the FTSE 100 Index. It’s important to choose UK stock brokers like eToro that provide you with a wide range of investment products.
This is much more ideal for long-term investors, as buying the FTSE 100 Index cash or futures CFD involves overnight charges as they are leveraged products. You can do this with eToro, as well as buy shares in the iShares FTSE 100 ETF 100% commission-free with no overnight charges!
Your capital is at risk.
FTSE 100 ETFs & Stocks
Investing in FTSE 100 exchange traded funds (ETFs) provides investors with exposure to the overall FTSE 100 Index. However, some investors may prefer to have more focused investments of the stocks that comprise the FTSE 100 Index.
For example, according to the London Stock Exchange, the biggest five companies by market capitalisation in the FTSE 100 Index are Unilever, AstraZeneca, HSBC, Diageo and Rio Tinto PLC, as shown below.
From the list above, you can see that the FTSE 100 Index itself has a heavy weighting towards banks, pharmaceutical stocks and the energy sector.
This is why investors may choose to be more selective about the stocks they invest in when stock trading. Let’s have a look at the top two.
Largest FTSE 100 Company – Unilever (ULVR.L)
At the time of writing Unilever was the largest company by market capitalisation listed on the London Stock Exchange and in the FTSE 100 Index. The Anglo-Dutch company also happens to be the third-largest consumer goods company in the world.
You may even know some of the companies’ brands such as Dove, Magnum, Hellmann’s, and more than 400 others!
With nearly 150,000 employees the company focuses on household and personal care items and is known as defensive stocks – one that performs well in a tough economy as we all need the products they make!
One really great feature about the eToro platform is the fact they provide detailed statistics and financial summaries of individual stocks, as shown above for Unilever.
This means you can do your own fundamental analysis and technical analysis from the platform while buying shares in the company 100% commission-free with no other charges!
Second Largest FTSE 100 Company – AstraZeneca (AZN.L)
AstraZeneca is a British-Swedish pharmaceutical company that has products for major diseases. They were a leader in the vaccine for the coronavirus pandemic of 2020.
While the euphoria around this quickly dissipated – as they were selling the vaccine at cost, analysts have remained bullish about new therapies the company is working on.
For example, their work on therapies for those who cannot have a vaccination is expected to add more than $3 billion to the company’s bottom line.
Your capital is at risk.
Step 3: Research FTSE 100 Investment
Now that you are more familiar with the different ways to invest in FTSE 100 it’s important to do your research on the best strategies to use, the best investments to make, and how to make money from the FTSE 100 before making any investment decisions. It’s also important to know some of the risks as well, as past performance doesn’t guarantee future performance.
Keep on reading to learn more about FTSE 100 investment!
Is FTSE 100 a Good Investment?
The FTSE 100 has struggled in recent years as Brexit uncertainty weighed on investor sentiment. The coronavirus pandemic did not help either, as the UK had one of the worst records in the world.
However, analysts are now turning extremely bullish on the long-term prospects of the FTSE 100 due to a variety of factors, including:
- The finalisation of a Brexit deal. The uncertainty regarding the UK and EU trading relationship has now ended and businesses can adapt to the new way of things. This helps the economy as companies can now plan and invest for the long term.
- A successful coronavirus vaccine rollout. The UK has had one of the best coronavirus vaccine rollout programmes in the world. This has helped analysts to forecast the economy could pick up much faster than other regions.
- Research shows the UK stock market is significantly undervalued. Investment bank UBS believes that the UK stock market is trading at a 20% discount to global equities on a price-to-earnings ratio meaning there is significant room to move higher. This means there could be quite a few undervalued stocks in the UK market.
Since the lows of the coronavirus pandemic in March 2020, the FTSE 100 Index is up around ~45%. However, it is still trading well below its all-time high price level of around ~GBP 7,900.00.
That means there is still nearly 30% upside left in the move higher before reaching the record high which was achieved in May 2018.
Your capital is at risk.
How to Make Money from Investing in FTSE 100
There are several simple ways to capitalise on the FTSE 100. If you are a short-term trader you may consider trading the FTSE 100 Index using CFDs. This allows you to trade on margin so you can open a large position using a small deposit – which has benefits and risks of course.
With the eToro trading platform, this is really simple. By clicking on Trade, the following ticket opens up for the FTSE 100 which they call the UK 100. The trading ticket shows that if you were to open a $10,000 position on the UK 100, it would provide you with a $200,000 exposure.
This is because the leverage has been set to x20 which means you can trade a position 20 times your deposit. Buying and selling on the eToro platform is 100% commission-free but there are spreads and overnight swap fees when using CFDs. These are all detailed at the bottom of the ticket.
Longer-term investors may decide to invest in FTSE 100 tracker funds, such as the iShares FTSE 100 ETF. Essentially, you are buying shares within this fund which aims to track the performance of the FTSE 100 Index.
In the above investment ticket from the eToro platform, you can see that a $10,000 investment would give you an exposure of $10,000. This is because you are buying real shares in the fund without any leverage.
It also means there are no fees to pay as it’s 100% commission-free with no overnight charges, making FTSE 100 tracker funds and ETFs much more suited to long-term investors.
FTSE 100 Investment Strategies
When it comes to choosing the right FTSE 100 investment strategy, there are a variety of strategies to choose from. The right one will depend on whether you are focused on long-term investing or short-term day trading.
Let’s explore some of the different options.
FTSE 100 Fundamental Strategies
Fundamental strategies are primarily used by long-term investors. These strategies would typically involve analysing UK economic data to identify the long-term direction of the FTSE 100 Index.
It may also involve analysing the direction of the British pound. This is because roughly 80% of the revenue from the one hundred companies in the FTSE 100 Index comes from international markets.
There is a correlation – while not perfect – between the British pound weakening and the FTSE 100 Index moving higher. However, the effects are mainly seen in the long-term picture.
FTSE 100 Technical Strategies
Technical strategies are mostly used by shorter-term investors who merely want to speculate on the price direction of the FTSE 100 Index. These types of strategies are used heavily by swing traders and day traders.
As these traders would typically use CFDs, they would look to trade long and short to profit from both rising and falling markets.
Most technical strategies will use technical tools and indicators to help find short-term swings or turning points in the market. It’s a style that is common among many investors nowadays and can work great when combined with fundamental strategies.
FTSE 100 Constituent Selection
Another option for investors is to focus on the individual stocks that make up the FTSE 100 Index such as, Barclays, Unilever, HSBC, Rio Tinto and many others.
During certain times the FTSE 100 stocks can benefit from flows moving into the overall index, as well as any strong company fundamentals helping to lift the share price. This provides a doubling effect which can create strong moves that last for some time.
Your capital is at risk.
Step 4: How to Invest in FTSE 100 on eToro
In the section below, we go through a step-by-step process on how to invest in FTSE 100 from the eToro trading platform. The platform is regulated by the FCA, ASIC, and CySEC and provides 100% commission-free trading, making it our platform of choice!
Step 1: Open an Account
Opening an account with eToro is a breeze. Just fill in some personal details, accept the Terms and Conditions and you are good to go!
After clicking ‘Create Account’ you will be redirected straight to the eToro platform where you can fill out more details about yourself and your experience to deposit funds and start investing.
Step 2: Upload your ID
eToro is a globally regulated broker and will need to verify your identity and address to maintain high compliance standards and follow standard KYC and AML procedures.
The documents can be uploaded on the platform and only two are needed:
- A valid passport or driver’s licence
- A bank account statement or utility bill issued within the last six months
Step 3: Deposit funds in your eToro Wallet
Depositing funds is a simple process. Just click on the Deposit Now button at the bottom left of the platform. What’s great about eToro, is the fact you can deposit funds commission-free!
Deposit methods include:
- Bank wire transfer
- Debit/credit card
Step 4: Choose your FTSE 100 investment and invest!
You can trade a variety of asset classes from the eToro platform such as stocks, indices, ETFs, commodities, currencies, and more.
You can also access CFDs on the FTSE 100 Index (called UK 100 in the platform) and invest in FTSE 100 tracker funds and ETFs. You can also trade and invest in the individual stocks that make up the FTSE 100 Index!
Once you’ve chosen your market, click the Trade button.
The trading ticket will allow you to input the amount you want to invest, how much leverage you want to use (if available) and put in stop loss and take profit orders. If there are any overnight fees to hold the position open then they will be detailed at the bottom of the ticket.
Click Open Trade to complete your transaction!
In this How to Invest in FTSE 100 UK – Beginner’s Guide we’ve gone through all the different ways to make money from the FTSE 100 and the best platforms to invest with.
Many analysts are bullish on the long-term prospects of the FTSE 100 as the UK starts its post-Brexit and post-coronavirus pandemic journey. In fact, research shows it is one of the most undervalued developed stock markets in the world!
To capitalise on this, it’s important to have access to the right platform and products. From our research, eToro ticks a lot of boxes as it is FCA regulated and offers 100% commission-free trading and investing.
It’s super quick to open an account and then you’ll see for yourself!
eToro – Invest in FTSE 100 UK – 100% Commission-Free
Your capital is at risk.
Should I invest in the FTSE 100?
How can I day trade the FTSE 100?
What are the best FTSE 100 companies to invest in?
How to invest in FTSE 100 tracker funds?
How do you invest in FTSE 100 stocks?
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Global analysts are now forecasting exponential growth for the UK market after the finalisation of Brexit and the coronavirus pandemic. If you’re looking to get...