The FTSE 250 (INDEXFTSE: MCX), often called “Footsie 250”, is a list of the 250 biggest mid-sized companies on the London Stock Exchange. Imagine a ladder with big companies at the top (FTSE 100) and small ones at the bottom (FTSE Small Cap). The FTSE 250 sits in the middle, like the rung between climbing high and starting out.
These companies are usually more focused on the UK than the giants in the FTSE 100. So, the FTSE 250 is kind of a temperature gauge for the health of British businesses in general. The index keeps track of how these companies are doing by following their share price. The higher the share prices, the better the FTSE 250 is doing.
The FTSE 250 is not to be confused with the FTSE 350. The FTSE 350 is an even bigger index that combines both the FTSE 100 (the largest companies) and the FTSE 250 (mid-sized companies) to track the performance of the top 350 companies listed on the London Stock Exchange.
History
Launched in 1992 with a starting base level of 2,403, the FTSE 250 has grown significantly, reaching a peak closing value of 24,250.80 in September 2021.
In terms of performance, the FTSE 250 achieved its highest annual yield of 46.3% in the year 2009. However, the index also experienced its worst year in 2008, when it plummeted by -40.32%, following the 2008 financial crisis. This highlights the FTSE 250’s susceptibility to market fluctuations.
How is the FTSE 250 Calculated?
The FTSE 250 favours bigger companies by giving their share prices more weight. This is called market cap weighting. Imagine a seesaw: companies with a higher market cap (more valuable) sit closer to the favoured side, tilting the seesaw in their favour. The index considers only freely tradable shares for a more accurate picture. It constantly adjusts throughout the day as share prices change.
The FTSE Russell, a subsidiary of the London Stock Exchange Group, recalculates the market cap of each company periodically as stock prices fluctuate throughout the day. To keep the index representative, there’s a quarterly reshuffle. Poor performers can lose their spot in the FTSE 250, while the best might even get promoted to the prestigious FTSE 100. This ensures the FTSE 250 always reflects the current landscape of the biggest mid-sized companies in the UK.
FTSE 250’s Biggest Companies
The FTSE 250 is a dynamic list, constantly evolving as companies vie for a spot among the UK’s top 250 mid-sized companies. This rigorous assessment ensures the index reflects the ever-evolving world of British businesses.
Some familiar names like easyJet, Hargreaves Lansdown, Greggs, and WH Smith are frequently found among the biggest players in the FTSE 250. These companies represent a diverse range of industries and are considered some of the UK’s most valuable publicly traded businesses.
As mentioned earlier, the FTSE 250 is not static. Companies are periodically promoted to the prestigious FTSE 100 for exceptional performance, while those falling behind may be replaced by rising stars.
For the most up-to-date information on the current constituents of the FTSE 250, you can visit the London Stock Exchange website. There you’ll find a complete list of the 250 companies along with their current market capitalisation and other relevant details.
Beyond The FTSE 250
The FTSE 250 offers a valuable window into the health of Britain’s mid-sized companies, but it’s not the whole picture. The London Stock Exchange boasts a range of companion indices that provide a more comprehensive view of the UK stock market:
FTSE 350: This index tracks the performance of the 350 biggest companies by market capitalisation on the exchange. It essentially combines the FTSE 100 (largest companies) and the FTSE 250 (mid-sized companies) to give a broader view.
FTSE Small Cap: This index focuses on smaller companies with high growth potential, offering insights into the emerging players in the UK market.
FTSE All-Share: This is the most inclusive index, tracking all the companies listed on the London Stock Exchange’s main market.
FTSE AIM 100 & FTSE AIM 50: These indexes cover the Alternative Investment Market (AIM). The FTSE AIM 100 tracks the 100 biggest companies listed on AIM, while the FTSE AIM 50 focuses on the top 50. AIM companies are typically smaller and more growth-oriented, offering investors the chance to be involved with companies with high growth potential.
FTSE AIM All-Share: This index, as the name suggests, tracks all the companies listed on the AIM market.
Frequently Asked Questions
How Is The FTSE 250 Different From The FTSE 100?
While both indexes track companies on the LSE, they target different segments. The FTSE 100 focuses on large-cap, more established companies, many of which generate a significant portion of their revenue internationally. The FTSE 250, on the other hand, includes mid-cap companies with a more domestic focus. This makes the FTSE 250 seen as a better indicator of the health of the UK economy.
Can You Invest In The FTSE 250?
You can’t directly invest in an index itself, but there are several ways to gain exposure to the FTSE 250:
FTSE 250 tracker funds: These passively managed funds mirror the performance of the index by holding all (or a representative sample) of the underlying companies.
Investment trusts: These actively managed funds invest in a basket of stocks, which can include a significant portion of FTSE 250 companies.
Buying individual stocks: You can research and directly purchase shares in companies listed on the FTSE 250.
Contracts for Difference (CFDs): This is a complex and potentially risky strategy best suited for experienced investors. CFDs let you speculate on the price movements of the FTSE 100.
Spread Betting: Similar to CFDs, spread betting allows you to speculate on price movements of the FTSE 100. However, spread betting is a tax-efficient option in some regions, but again, carries significant risk.
