FTSE 100 is not a financial entity; it is an index. If you want to invest in the FTSE 100 index, you can invest in ETFs or buy the company’s shares listed on the FTSE 100 index. By buying ETFs, you can easily track the price of shares of index constituents. Later on, you can sell the shares to earn a profit. The ETFs investors can also benefit from dividends if issued. But first, you need to understand what ETFs are:
ETF stands for exchange-traded funds. They are similar to mutual funds, but the main difference is that ETFs are listed on Exchange and are traded like any ordinary stocks throughout the day. Exchange-trade funds have an associated price and can be bought and sold. Its price fluctuates as the shares are bought and sold throughout the day.
Exchange-trade funds are not like stocks. They hold many underlying assets. Some ETF own stocks of various sectors, and some ETF focus on a particular industry. There are different types of ETFs, like:
- Commodity ETFs: they track the price of stocks of commodities. Gold and crude oil are included in commodity ETFs.
- Bond ETF: bonds like corporate bonds, municipal bonds (state and local bonds), and government bonds are included in bond Exchange trade funds.
- Inverse ETF: it is an effort to gain profit from the stock decline.
- Industry ETFs: they track the share prices of a particular sector like oil & Gas or banking.
- Currency ETFs: it is an investment in foreign currencies.
Buy FTSE 100:
As discussed earlier, it is not possible to but directly invests in FTSE 100, but you can do it via buying ETFs.
Just like any other shares, you can buy Exchange trade funds. You cannot, but Exchange trade funds directly from ETFs provider can buy ETFs from a traditional stockbroker, wealth management services, a fund platform, or an online broker.
To buy an ETF, you need to open an online account with an online broker, and then you have to choose which specific type of ETF you want to invest. The cost of buying Exchange trade funds varies with different platforms and brokers. There is no transaction tax on buying ETFs. An Exchange-traded fund also charges an annual ongoing fee and is deducted from the returns of ETF.
Following is the list of some of the best FTSE 100 ETFs: (calculations are done in GBP, including Dividends).
|S.No||ETF||2020 in %||2019 in %|
|1||HSBC FTSE 100 UCITS ETF GBP||-20.17 %||17.20 %|
|2||Invesco FTSE 100 UCITS ETF||-20.36 %||16.91 %|
|3||Lyxor FTSE 100 UCITS ETF – Acc||-20.42 %||17.11 %|
|4||Amundi ETF FTSE 100 UCITS ETF GBP||-20.47 %||16.90 %|
|5||Xtrackers FTSE 100 UCITS EFT 1C||-20.52 %||16.93 %|
|6||UBS ETF (LU) FTSE 100 UCITS ETF (GBP) A-dis||-20.57%||16.99 %|
|7||iShare Core FTSE 100 UCITS ETF (GBP) Acc||-20.58 %||17.17 %|
|8||Xtrackers FTSE 100 UCITS ETF Income 1D||-20.58 %||17.04 %|
|9||iShare Core FTSE 100 UCITS ETF (Dist)||-20.97 %||17.50 %|
|10||Vanguard FTSE 100 UCITS EFT Distributing||-20.83 %||17.19 %|
When can you buy FTSE 100?
ETFs are traded on the stock market, just like other shares, and can be bought and sold at any time during market hours. The UK market hours are from 8:00 am to 16:30.
Sell FTSE 100?
The advantage of buying ETFs is that you can sell them at any time because they are treated like other stocks. By selling them, you can protect yourself from the drop in the stock market. You can sell the already owned ETFs by placing a selling order with your brokerage. FTSE 100 ETFs can also be sold by a limit order or a market order.
Buy & Sell Spread:
All investors need to understand the hidden cost associated with ETFs’ buying and selling, known as buying/selling spread. The difference between the selling and buying price is calculated based on the highest bid offer.
For instance, a seller is willing to sell ETF at $3.50 per share. Consider it the lowest price any seller is ready to sell, and $3.45/share is the highest price any buyer is prepared to buy an ETF. So, the buy/sell spread is 5 cents or 2 %.
Spreads indicate liquidity; the popular ETFs have lower spread and unpopular ETFs have a wider spread.