How to Invest in the FTSE250 Index Today
Since Brexit and the coronavirus pandemic, many investors have chosen to focus on the well-known FTSE 100 stock market index to seek out investment returns.
However, while the FTSE 100 index returned around 4.2% in the first quarter of 2021, the FTSE 250 index returned nearly 10% during the same time.
In this article, we go through the differences between the FTSE 100 and the FTSE 250, what is the FTSE 250 index and how to invest in it. Let’s get started!
Table of Contents
How to Invest in the FTSE 250 Index in 3 Steps!
If you’re looking for a quick way to start investing in this index, then you could follow the three steps outlined below:
- Open an Admirals (formerly Admiral Markets) Invest.MT5 account so you can invest in stocks and ETFs (exchange traded funds) from 15 of the largest stock exchanges in the world.
- Download the MetaTrader 5 trading platform provided by Admirals, or use the online web trading platform completely free to view live prices of the market you wish to trade.
- Open a trading ticket on the market you wish to trade and place your trade! You can buy a selection of ETFs that track the FTSE 250 index price and invest with commissions starting as low as $0.01 per share with only a $1 minimum transaction fee.
You can get started by opening an account here. But, be sure to keep on reading to learn more about the FTSE 250 share index, how to analyse it and how to invest in it.
What is the FTSE 250 Index?
The FTSE 250 index represents a basket of stocks that are listed on the London Stock Exchange. The index is calculated by weighing the stocks on the exchange by their market capitalisation. One of the most well-known stock indexes is the FTSE 100 index.
- The FTSE 100 index represents the largest 100 companies listed on the London Stock Exchange by market capitalisation.
- The FTSE 250 index represents the 101st to the 350th largest companies on the exchange by market cap.
As the index weighs companies by market capitalisation, the biggest companies with the highest market cap have a bigger effect on the price of the index.
Investors can invest in the index through ETFs (exchange traded funds) which track the performance of an index, or through the individual stocks that make up that index. This is discussed in more detail further on.
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The Different Types of FTSE Indexes
The FTSE Group (Financial Times and Stock Exchange Group) is the company that created and manages the FTSE indexes. This includes the FTSE 100, FTSE 250, FTSE 350, FTSE All-Share and the FTSE Small Cap. There is also a range of other indices for AIM stocks which are smaller but growing companies.
When people ask what is the FT index, most people would refer to the FTSE 100 as this index represents the largest publicly traded UK companies, or shares, such as BP, HSBC, etc. It’s the index that is more widely quoted in financial media. However, while the companies in the index may be UK-based, the majority of operations and sales are actually outside of the UK.
In fact, more than two-thirds of all the revenue and profits from the FTSE 100 companies come from outside of the UK. The FTSE 250 index which is the next 250 largest stocks by market cap on the London Stock Exchange is more focused on the UK’s domestic economy.
This is why the FTSE 250 share index is considered to reflect the state of the UK economy than the FTSE 100. While there are still international companies in the index, the majority of the companies make their revenue from the UK.
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FTSE 250 Index Constituents
The FTSE 250 index constituents include companies from all types of stock sectors such as retail, leisure, property, autos and more.
The top 10 companies in the index by market cap include gambling company 888 Holdings PLC, financial services company Virgin Money UK PLC, television broadcaster ITV PLC, property developer Hammerson PLC and others.
This is shown from the constituent list directly from the London Stock Exchange website, as shown below:
Source: LSE, 28 April 2021
Some investors may focus on investing directly into some of the companies listed within the index. Other investors may choose to invest in the index to gain broader exposure to the FTSE250 index. Ultimately, it depends on your chosen investing style and trading strategy.
However, to invest in an index investors typically have to do so through exchange traded funds (ETFs). This is where investment management companies like BlackRock or Vanguard create a fund that tracks the underlying index. They would buy all of the assets that compromise the fund so the investor can just invest in one asset to gain exposure to the whole basket of stocks held within it.
Investing in FTSE 250 Index Funds
There are a variety of FTSE250 index funds available to investors.
With Admirals, you can trade and invest in the iShares FTSE 250 ETF and the Vanguard FTSE 250 ETF. These funds buy the 250 stocks that make up the index to allow investors exposure to the index with just one investment - useful when building an ETF trading strategy.
Below is a FTSE 250 index chart that shows the historical price of the iShares FTSE 250 ETF.
Source: Admirals MetaTrader 5, MIDDL, Monthly - Data range: from 1 Mar 2004 to 28 Apr 2021, accessed on 28 Apr 2021 at 12:30 pm GMT. Please note: Past performance is not a reliable indicator of future results.
Interestingly, the FTSE 250 index today (at the time of writing), shown from the iShares FTSE 250 ETF chart above, shows the index trading at a record, all-time high price level. The FTSE 100 index, however, is still some way of reaching its record high price level.
This divergence between the indexes highlights the differences between the two indices due to how they are constructed. It also explains a lot to investors who questioned why the UK economy was doing well from the rollout of the coronavirus vaccine but moaned that the FTSE 100 index hasn’t gained as much as other stock market indexes.
Successful FTSE 250 analysis means understanding the background behind how the indexes are constructed in the first place and what influences its price movement. Currently, what’s happening to the FTSE today is mainly being affected by how effective the coronavirus vaccine rollout is.
The Admirals Invest.MT5 Account
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You can get started with a demo account or a live account with just €1 as a minimum deposit. Furthermore, you can invest in stocks ETFs from as low as $0.01 on US stocks, with low minimum transactions fees of just $!
Learn more and open an account today by clicking on the banner below!
How to Invest in FTSE 250 Index ETFs
If you’re interested in learning how to start investing in the FTSE 250 index of your choice, then you can follow the next steps.
- Open an Invest.MT5 account completely FREE with as little as €1.
- From your online client portal area called the Dashboard simply click on Trade to open the MetaTrader 5 web trading platform.
- Type in the instrument you wish to trade on in the search box at the bottom of the Market Watch window on the left. A selection will appear for you to choose from, click the one of your choice.
- Once confirmed, drag the symbol name onto the chart to view the live and historical price of the instrument. You can adjust timeframes and add on technical analysis trading indicators if you wish.
- Right click on the chart and select Trading and then New Order. From here you can set your volume (transaction size) while also placing a stop loss or take profit price level for risk management, as shown below.
Source: Admirals MetaTrader 5 Web, MIDDL, Monthly - Data range: from 1 Dec 2004 to 28 Apr 2021, accessed on 28 Apr 2021 at 12:30 pm GMT. Please note: Past performance is not a reliable indicator of future results.
Now you know how to invest in the FTSE250 index, how do you know when to invest in the index?
Some investors choose to use fundamental analysis and look at the broad macro picture to aid in their decisions. Typically these investors would have a much longer time horizon so they don’t need to try and ‘time’ their investments which is a challenging endeavour.
However, some investors do decide to take up this challenge and use technical analysis to help find turning points in the market. This type of analysis is now much more widespread and the combination of both types - fundamental and technical - can be very powerful.
Fortunately, due to some huge advances in technology, you can now access new cutting edge investing tools to aid your decision-making process.
The Exclusive Premium Analytics Investing Tool
When you have opened a demo or live trading account you can access the exclusive Premium Analytics tool from the Dashboard.
This is where you can access the Technical Insight Lookup Indicator which provides you with actionable insights and ideas on thousands of different instruments.
Source: Premium Analytics, 28 April 2021
For example, in the screenshot above the indicator shows it has found 20 different technical events that are taking place on the share price of ITV. These are split up into short-term, intermediate-term and long-term.
Each technical event is explained in detail with levels and a chart to illustrate what is happening. The first few events shown above include a Slow Stochastic Cross, a Hammer Candle Pattern, a MACD Crossover and others. This is a great learning tool as well as an investing tool!
You can use this indicator to search for technical ideas on thousands of different markets covering stocks, ETFs, indices, currencies, commodities and more.
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The UK stock market is widely considered as one of the most undervalued of the developed nations around the world. This is largely due to the impact the British Pound has had on the index and some political uncertainty.
However, the domestic economy is forecasted to grow exponentially thanks to a successful coronavirus vaccine rollout programme. It explains one reason the FTSE 250 index has currently outperformed the FTSE 100 index.
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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or recommendation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.