The FTSE Small Cap (INDEXFTSE: SMX), often called “Footsie Small Cap”, tracks the performance of companies ranked from 351st to 619th in terms of market capitalisation on the London Stock Exchange main market. It acts as a benchmark for investors interested in tracking the performance of smaller companies in the UK market. While the FTSE 100 focuses on the largest UK-listed companies and the FTSE 250 includes mid-cap stocks, the FTSE Small Cap provides insight into the performance of smaller companies with high growth potential.
History
Established in 2004 by FTSE Russell, a subsidiary of the London Stock Exchange Group, the FTSE Small Cap Index has since become a vital tool for investors seeking exposure to smaller companies in the UK. Its inception marked a significant step in providing a comprehensive representation of the UK equity market.
How is the FTSE Small Cap Calculated?
The calculation methodology of the FTSE Small Cap is based on market capitalisation, which is determined by multiplying a company’s share price by its total number of outstanding shares. Constituents of the index are reviewed regularly to ensure they meet the necessary criteria, such as free float and liquidity. The index is weighted by market capitalisation, meaning companies with higher market capitalisations have a greater impact on their performance.
FTSE Small Cap Biggest Companies
Here are some examples of the leading companies within the FTSE Small Cap Index, representing a diverse range of industries:
- AO World plc: An online electricals retailer known for its wide range of products and excellent customer service.
- B&M European Value Retail: A discount retailer operating in the UK and other European countries, offering a variety of goods at affordable prices.
- Pets at Home Group plc: A leading retailer of pet supplies and services, catering to the needs of pet owners across the UK.
- Trainline plc: An innovative digital platform that provides train ticketing services, making travel more accessible and convenient for consumers.
- WH Smith plc: A well-established retailer offering a diverse range of products, including books, stationery, and convenience goods, both in physical stores and online.
Beyond The FTSE Small Cap
The FTSE Small Cap Index provides a valuable window into the performance of smaller UK companies. However, for a broader view, it’s worth exploring other indices that track smaller companies listed on the London Stock Exchange. Here are a couple of key examples:
FTSE All-Share Index: This index tracks the performance of all listed companies on the London Stock Exchange main market. It provides a broad representation of the UK stock market, encompassing large, mid, and small-cap companies listed on the main market, but excludes companies on the AIM market.
FTSE AIM All-Share Index: This index specifically focuses on the Alternative Investment Market (AIM). It tracks the performance of all companies listed on the AIM market, which caters to smaller and growing businesses. The FTSE AIM All-Share offers a separate way to gauge the performance of the AIM market compared to the FTSE Small Cap, which includes some companies listed on the main market.
Frequently Asked Questions
What is the difference between the FTSE Small Cap and the FTSE 250?
The FTSE Small Cap Index includes smaller companies with lower market capitalisations compared to those in the FTSE 250, which comprises mid-cap stocks. The FTSE 250 typically represents companies with market capitalisations above those in the FTSE Small Cap but below the largest companies in the FTSE 100.
Is investing in small-cap stocks riskier than investing in large-cap stocks?
Small-cap stocks are often associated with higher volatility and greater risk compared to large-cap stocks. However, they also offer the potential for higher returns, as smaller companies have more room for growth and expansion. Investors should carefully assess their risk tolerance and investment objectives before investing in small-cap stocks.
How often are constituents of the FTSE Small Cap Index reviewed?
Constituents of the FTSE Small Cap Index are reviewed on a quarterly basis to ensure that the index remains representative of the small-cap segment of the UK equity market. Adjustments may be made based on changes in market capitalisation, liquidity, and other relevant factors.
