The FTSE 350 - an alternative option for trading stocks and shares

When asked about UK stock exchanges, the FTSE 100 is undoubtedly the first that springs to mind, but the FTSE 350 could be an equally good place for you to look if you want to buy and sell shares.

The index is run by the London Stock Exchange - in the same way that the FTSE 100 and FTSE 250 are - and is an amalgamation of these two indexes, with the 350 largest firms represented in its listings.

Although the FTSE 350 is a UK-based index, you will find that the majority of the companies listed on it are international in their nature, which is something you should be aware of when you are deciding where to place your investment.

One of the things you need to consider before choosing which shares to buy is the risk involved with each business - which can be assessed by its financial performance, the sector it works in and the geographical spread of its operations.

For example, a company that works in Asia, Europe and the US is likely to be a less risky proposition than one that is solely based in Asia. This is because a firm with global operations will spread its risk across different markets, meaning that if one falls, the others may help compensate for the drop.

This is not a hard-and-fast rule but it is certainly worth bearing in mind.

Similarly, when you are making investments, you should ensure that you split your capital across a range of industry sectors and do not limit yourself to one area, as this could see you lose out substantially should these businesses take a hit.

You will definitely have plenty of choice about the sectors you invest in if you are buying stocks and shares on the FTSE 350, with industries such as alternative energy, chemicals, general retailers, software and computer services, travel and leisure and mobile telecommunications all represented.

In terms of the firms listed on the index, there are bound to be some familiar names that stand out to you, with the likes of Marks and Spencer, Domino's Pizza and HSBC Holdings all featuring on the FTSE 350.

But before you start choosing which companies you would like to invest in, you should think carefully about what you hope to achieve by placing your money into stocks and shares.

Are you looking for a long-term investment that can provide a regular income - such as through the payment of dividends - or would you prefer to focus on businesses that are set to grow and sell shares when they increase in value?

You may find that it is a good idea to consult a financial advisor about which investment strategy is most appropriate for your situation.

Risk is another key factor you need to take into account and you should make sure that you consider the possibility of making losses, as well as enjoying gains.

Looking at the previous performance of a company, as well as the sector it operates in, can be helpful, but be careful that you do not base your decision solely on this.

Seeking out analysts' predictions could give you an indication of how a particular share is expected to perform, while looking for news on potential takeover deals - as well as anticipated financial results - is sensible if you are hoping to predict the future value of stocks and shares.

Once you have put your money in particular shares, it is vital that you always keep an eye on the market to see how your investment is performing. That way you can take steps to capitalise on any significant upward movement - or attempt to mitigate any losses.

This means that you should have a good understanding of how companies are listed on the FTSE 350, which will include knowing the specific code assigned to the firms you have bought shares in.

By investing in a broad portfolio of shares, keeping a close eye on their movements and making sure you keep abreast of any industry or company news, you will have a better chance of enjoying a return on your investment.

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2011-04-20 14:29:07 © Moneyextra.com