FTSE 100 hits new record high – what's the difference between the FTSE indices?

The FTSE 100 hit a new all-time high of 7,906.58 on Friday, passing its previous record of 7877.45 back in May 2018. However, it's no secret that parts of the UK stock market have been unloved over the last few years.

UK investors have had a tough time, from long-lasting Brexit negotiations to market falls and dividend cancellations during the pandemic. Now companies are dealing with sky-high inflation spurred by the ongoing conflict in Ukraine.

As the FTSE 100 climbs and investors mull over UK opportunities, we've gone back to basics to take a closer look at the main UK stock market indices and how they've performed.

This article isn't personal advice. If you're not sure if an investment is right for you, ask for financial advice. Investments rise and fall in value, so you could get back less than you invest. Past performance isn't a guide to the future.

FTSE 100

The FTSE 100 is probably most well-known to UK investors. It measures the performance of the 100 largest companies traded on the London Stock Exchange (LSE). It's by far the most widely used UK stock market indicator, featuring big names like AstraZeneca, Shell, HSBC and British American Tobacco to name a few.

Lots of these companies don't only carry out business or sell their products and services in the UK. They're recognised on the global stage too. This means they can be impacted by currency movements, global policies and trends, particularly in the US and Europe.

With dividends reinvested, the FTSE 100 has grown 297.36%* in the last 20 years. This would've turned an initial investment of £10,000 into £39,736.

Past performance isn't a guide to future returns. Source: *Lipper IM to 31/12/2022.

These numbers give you an idea of how the index has performed, but they don't take account of things like investment charges. You can normally only track an index through investments like index funds or exchange traded funds. The cost of using these, means performance is unlikely to be identical to the index.

FTSE 250

The FTSE 250 is made up of the next biggest 250 companies after the FTSE 100, also known as medium-sized companies. These are thought to have more potential to grow because they're usually seen to be more innovative or nimble. But this can come with greater risks as they can be more volatile.

Companies in the FTSE 250 tend to be more UK focused than those in the FTSE 100, as they typically carry out more of their business in the UK than abroad. For that reason, this index is considered a better indication of the health of the UK economy than the FTSE 100.

It includes household names like easyJet, Greggs, J D Wetherspoon and ITV. There are also companies that earn their money overseas too.

With dividends reinvested, the FTSE 250 has grown 649.7%* in the last 20 years. This would've turned an initial investment of £10,000 into £74,970. While these numbers might look impressive, this market is more volatile, and can experience more significant setbacks when the UK market is out of favour.

Past performance isn't a guide to future returns. Source: *Lipper IM to 31/12/2022.

FTSE All-Share

The FTSE All-Share is made up of the FTSE 100, FTSE 250 and FTSE Small Cap. As the name suggests, the FTSE All-Share index includes large and medium-sized companies, as well as much smaller companies – the 351st to 585th next largest companies on the LSE. The broad range of companies means the FTSE All-Share captures around 98% of the UK's market.

While diversified, it's still heavily weighted to larger companies, like those featured in the FTSE 100. Bigger companies make up a more significant proportion of the index, so have more of an impact on the overall performance.

With dividends reinvested, the FTSE All-Share has grown 336.08%* in the last 20 years. This would've turned an initial investment of £10,000 into £43,608.

Past performance isn't a guide to future returns. Source: *Lipper IM to 31/12/2022.

Investing in the FTSE 100, 250 and All-Share – which one?

They all seem pretty different, right?

Well, the FTSE 250 certainly offers investors something different from the FTSE 100 and All-Share. But while the FTSE 100 and All-Share offer good opportunities for investors to diversify across a broad range of shares, they give you something very similar.

Both indices are mainly made up of the same gigantic companies, so historically performance between the two hasn't usually been that different.

The point here is to always look a bit deeper. Just because they're different indices doesn't mean they're completely different in the way that they'll behave.

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