The Best Australia Can Offer – The ASX 250
The FTSE 250 is a shortened form of the Financial Times and Stock Exchange 250 index and represents 250 top companies listed on the London Stock Exchange. The FTSE 250 companies list is a capitalization-weighted index that’s made up of the top 101 to 350 companies listed on the London Stock Exchange. The top 100 are indexed on the LSE as the FTSE 100.
Maintained by the FTSE Group, the index is calculated in real-time and its value is refreshed and published by the minute by. However, demotions and promotions to the index only occur quarterly in the months of March, June, September, and December.
The FTSE 250 is related to the other indices of the LSE, including the FTSE SmallCap Index and the FTSE All Share Index. Furthermore, a significant portion of companies listed within the index are investment trusts.
For the most part, the performance of the FTSE 250 can be dragged down by high exposure to investment trusts.
FTSE 250 Index Explained
The FTSE 250 is quite similar to the FTSE 100, but it’s more like a little brother to the latter. While FTSE 100 is made up of multinational corporations, the FTSE 250 is comprised mainly of businesses with a domestic focus in the United Kingdom.
One important characteristic to pay attention to is the fact that FTSE 250 companies aren’t 250 of the highest capitalized stocks in Britain, rather they’re just stocks ranked from 101 to 350 in terms of market capitalization.
This makes the risk and returns profile of the FTSE 250 completely different to the FTSE 100.
Some of the FTSE 250 companies are as follows:
- 3i Infrastructure
- Acacia Mining
- BBA Aviation
- Caledonia Investments
- Fidelity European Values
The Bottom Line
Since the companies in the FTSE 250 are mostly mid-cap to small-cap, they can often lack informational efficiency that’s enjoyed by large-cap companies in the FTSE 100. At the same time, these mid-cap companies can also outperform their large-cap counterparts, but there is a sense of high volatility, which might be attractive for investors.
Because of their size, the FTSE 250 companies also have the potential of scaling rapidly. They also provide investors with a good option when it comes to diversifying their investment portfolio.
Beginners thinking of getting into the FTSE 250 should, as with all investing, practice caution and do their homework to further develop their skills and get familiar with the inner workings of the index.
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