Trading Opportunities with the FTSE All Share Index

FTSE All Share Index | A Slice of the LSE for Your Portfolio
The London Stock Exchange (LSE) is one of the oldest and most important financial institutions in the world, and in case you have heard of the FTSE All Share Index but don’t know what it is, here is your answer: it is an aggregation of the FTSE 100, FTSE 250 and FTSE SmallCap Index, covering approximately 620 of the top companies on the LSE.

As one of the leading stock exchanges in the world, the LSE allows traders to access the most liquid pools of capital. The LSE includes a long list of companies from more than 60 countries, provides equities of these companies for trading, shows robust and real-time pricing for investors to have the possibility to adjust their financial strategies according to the current market situation.

The London Stock Exchange is the primary source of benchmark prices, market liquidity, and market data. Having international partners in Asia and Africa, the LSE tends to be a worldwide market that erases barriers for traders across the globe.

Two very popular indices are the FTSE 100 Index (Financial Time Stock Exchange 100 Index), which is the share index of the top 100 companies by market capitalisation on the LSE, and the FTSE 250, which represents the share index of the next 250 (101-350) companies by market cap. Additionally, there are other well-known share indices of the LSE including the FTSE SmallCap Index (companies ranked 351-619 by market cap).

And a Stock Market Index Is?

A share index or stock market index is basically a measurement of a specific section of the stock market, i.e. the top 100 companies or, in the case of the FTSE All Share Index, over 600 of the UK’s top companies. Each listed company’s shares will rise and fall over the day’s trading on the LSE, and the aggregated total is continuously calculated against the previous day’s close. When a share index is quoted up or down, it is measured against the previous day’s closing total.

The FTSE All Share Index represents around 98% of the market capitalization of the UK listed shares. This index is often considered as the foundation for investment products (funds and ETFs). FTSE futures included in the All Share Index are not based on underlying assets, which makes them different from stock, index, and commodity futures. Thus, trading turns into a more complicated speculation on the value of the index.

Trading on indices is a popular means of investment, which can offer opportunities for short-term and long-term investing, while giving investors exposure to many companies and many factors.

A World of Major Indices

Besides the well-known indices on the LSE, there are many indices on other exchanges that may present a good opportunity to savvy traders. While a comprehensive index like the FTSE All Share offers a wide view, there may be times when a non-UK index offers options to diversify or hedge other investments. Some popular indices located outside UK include:

  • European stock indices such as the Euro Stox 50, CAC 40, Dax 40, IBEX 35 and MIB 40
  • American indices including the US Dollar Index, S&P 500, NASDAQ 100 and DOW 30,
  • African indices such as the JSE 40, MASI Index, EGX 30 and BSE DCI
  • Asian and Australian indices for example the Nikkei 225, Hong Kong 50, China Enterprise 40, ASX 200, Bombay Stock Market Index and KOSDAQ Index

FTSE All Share Index Broader than FTSE 100

Companies listed on the FTSE 100 are estimated to represent around 80% of the market capitalisation of the LSE, which is comprised of over 2000 PLCs. For that reason, each company doesn’t move the FTSE All Share Index equally. For example, one of the largest FTSE 100 constituents like BP will have a weighting of 4.88.9% and a relatively small sized FTSE SmallCap constituent like Charles Taylor has a weighting of just 0.01%. In simple terms, if BP’s stock rises, it will have a bigger impact on the index’s price than the smaller companies at the bottom.

Because of those weightings, the FTSE All Share Index tends to historically mirror the performance of the FTSE 100 due to the influence of those blue-chip stocks. However, the blue-chip companies’ weightings are slightly more diluted within All Share than with the FTSE 100, so the price moves of the extended index are less dependent upon them.

For example, while BP has a 4.88.9% weighting on the FTSE All Share Index, it has a 6.05% weighting on the FTSE 100 Index, making it more influential. That essentially means that if your indices trading strategy is based on the fortunes of big companies, opt for the FTSE 100; if you want a broader range, invest in the FTSE’s All Share Index. 

Online Trading Opportunities on Blue-Chip Stocks

Index trading can have plenty of benefits, and major share indices like the FTSE 100 and Dow Jones have seen record highs recorded in the last couple of years. However, the UK stock exchange is often cited as a “stock pickers” market, as the FTSE indices are only now eclipsing the highs seen before the 2007-08 financial crisis. That means some experts advise that you should trade individual stocks, such as those available for online trading at r1investing, including:

  • Barclays PLC – a multinational investment bank and financial service company.
  • Aston Martin – an iconic manufacturer of luxury cars.
  • BP – one of the world’s foremost oil and gas companies.
  • Tesco – the UK’s largest retailer.
  • Vodafone – a global telecommunications conglomerate.

Trade Indices at r1investing

Indices offer traders a slice of a market, which could be more interesting than choosing to invest in one stock or another narrow market. r1investing offers indices trading via CFDs, which lets you trade on the direction the index will go without your needing to deal with buying and holding the index outright. Furthermore, when trading indexes CFDs, you can avail yourself to leverage, which gives you more power behind your trades, though that power can become a greater risk as well.

Think trading on indices, such as the FTSE All Share Index, sounds appealing? Open an account, register, and see if trading CFDs on indices is for you. r1investing has a wide choice of indices to trade, as well as forex pairs, cryptos, commodities and stock share CFDs. Plus, we have some of the best account managers found anywhere, a rich education center, and the most popular funding methods. To find out more, open an account today.

The information provided is for educational purposes only and should not be considered investment advice. Past performance is not reliable indicator for future results.
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Written by:
Omer Aragón Godínez

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