What does investing in the FTSE 250 look like? – Plus 2 fund ideas

With the Autumn Budget just around the corner, investors are paying close attention to what might be in store.

Changes to taxes and spending could have a big impact on businesses that depend on the UK economy.

Unlike the FTSE 100, which is dominated by global giants, the FTSE 250 is home to companies that earn more of their revenue here in the UK. That makes them more sensitive to shifts in government policy and consumer confidence at home.

But it also means they could benefit from measures aimed at boosting growth and investment – areas the Budget is expected to prioritise.

This article isn’t personal advice. All investments can rise and fall in value, so you could get back less than you invest. Past performance also isn’t a guide to the future. If you're not sure if a course of action is right for you, ask for financial advice.

What’s in the FTSE 250?

The FTSE 250 is widely known as the benchmark for medium-sized UK companies.

These businesses often offer greater growth potential than their larger counterparts, but they can also be more volatile, which adds risk.

What many investors might not realise is that almost a third of the FTSE 250 is made up of investment trusts – and their share of the index has nearly tripled over the past couple of decades.

An investment trust is a company that aims to make money for its shareholders by investing in a portfolio of stocks, property or other assets. When you buy a share, you’re buying a slice of the trust’s underlying portfolio. It’s different from a fund in its management and legal structure.

The investment trusts in the FTSE 250 invest across a wide range of sectors.

For example, 10% of these trusts invest purely in infrastructure and 10% in private equity (companies not listed on the stock market).

Others focus on overseas markets like North America, Japan and China and some specialise in niche areas such as renewable energy, healthcare and commodities.

So, while these trusts are FTSE 250 companies, they give investors indirect exposure to other assets and markets including more specialist areas that could be more volatile.

How can you invest in the UK stock market?

Investing in index tracker funds is a simple and low-cost way to track the performance of a benchmark, like the FTSE 250, rather than try and beat it like active funds do.

If you’re looking for broad exposure to domestic UK businesses, here are two passive funds that offer a way to track this part of the market.

These funds could be a good addition to a global portfolio or work well alongside a FTSE 100 tracker to provide more diversification and growth potential. Or they could diversify a portfolio focused on larger companies or bonds.

Investing in these funds isn’t right for everyone. Investors should only invest if the fund’s objectives are aligned with their own, and there’s a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest, and make sure any new investment forms part of a diversified portfolio.

For more details on each fund including its charges and risks, use the links to their factsheets and key investor information.