What is the FTSE 100, FTSE 250 and FTSE 350?

Hello. I'm Dan Coatsworth, an investment analyst at AJ Bell. I'm here today to talk to you about the main UK stock market indices. You may have heard lots of people talk about the FTSE 100, FTSE 250 and the FTSE 350. 

Don't worry if you don't know what they are. This video will tell you everything that you need to know. These indices are baskets of stocks.

The FTSE 100 features the 100 biggest companies by market value on the London Stock Exchange. 

The FTSE 250 is the next 250 biggest companies by market value. 

And the FTSE 350 is simply the FTSE 100 and the FTSE 250 grouped together. They’re very important indices because they act as the benchmark for the UK stock market. 

The FTSE 100 is considered to be the best representation of larger companies listed in the UK. When you hear people talking about the UK stock market in general terms, particularly if it's on the BBC or some of the other major news channels, you can be sure that they're referring to the FTSE 100. Companies in the FTSE 100 are generally valued at £4 billion or more. These are gigantic companies and many are household names. Lots of them will do business around the world. 

The FTSE 250 is viewed as the benchmark for medium sized companies, often referred to as mid-caps, and you've probably heard of many businesses in this index as well as it contains names which have been around for decades as well as some more successful newer names. Investors are often attracted to the FTSE 250 index because it often contains businesses that still growing at a decent pace. Valuations typically range from about £400 million pounds to £4 billion pounds. Many companies in the FTSE 100 index may be growing at a slower pace than that those in the FTSE 250. 

It's very hard to grow fast when you're already earning the big bucks. But many investors aren't put off from investing in FTSE 100 stocks despite this situation. They like the idea of backing big businesses and potentially collecting decent dividends Index provider FTSE Russell, which is owned by the London Stock Exchange, rejigs the FTSE 100 and FTSE 250 indices every three months. 

The idea is to see if any companies have grown in value and could potentially be promoted to a higher index. FTSE Russell's review also kicks out companies which have fallen a lot in value and need to be demoted. Companies are bumped out of the FTSE 100 if they are no longer one of the UK's 110 largest listed groups. 

Alternatively, names from the FTSE 250 are promoted into the FTSE 100 if they score within the top 90 by value when the market closes on a certain date every quarter. Anyone demoted from the FTSE 250 would fall into the FTSE small cap index. And below that level, you'll find the FTSE fledgling index. 

AIM stocks don't qualify for inclusion in the FTSE 100, 250, small cap or fledgling indices, even if they're big enough. That's because AIM is a separate market, and it's got its own indices. If you want to track the performance of FTSE 100 or the FTSE 250 investment product, you can potentially look at tracker funds or exchange traded funds, which mirror the ups and downs from these indices. Thanks for watching.