What's the difference between the FTSE 100, 250 and 350

If you're thinking about what to do with your money but are considering putting it in shares and don't know where to start, you're not alone. The world of the stock market can seem very daunting at the beginning but with some guidance, you'll soon be able to determine exactly where you wish to put your cash.

As interest rates have been low, many people who have previously kept their money in savings accounts are now wondering what they can do with their finances in order to get a good return.

Maybe you've been hoping that you would have saved enough for retirement or you want to get more capital together to have for the future. There are plenty of reasons why you might want to earn more money by using the cash you already have.

But once you've decided to enter the world of stock markets, you might not know where to start and how to make sense of all the jargon.

The first thing to learn is what the FTSE 100 is, as this is the biggest stock market Index in the UK.

It was originally set up by the London Stock Exchange and the Financial Times in 1984 and it is now a very important indication of how British businesses are faring in the economic world.

The FTSE 100 is comprised of the top 100 highly-capitalised blue chip companies in the UK, so you can be sure putting your money in this index will mean that your cash is in shares of some of the country's biggest and well known firms, including Aviva and BP. How much money you make or lose will then depend on that company’s performance.

This list also represents 81 per cent of London Stock Exchange's market capitalisation, showing that there is a wide range of businesses on this index for you to choose from.

It is updated every 15 seconds, so you may want to keep an eye on the FTSE 100 to stay knowledgeable of all the latest developments and see how your shares are doing.

The fast-paced nature of this index shows how quickly things can change in the stock market, which will be good news to those who enjoy an adrenaline rush from time to time.

Alternatively, you may want to put your cash in the FTSE 250 or 350.

The former index comprises of the UK's next 250 mid-capitalised blue chip firms, representing 15 per cent of the British business market.

As a result, there will still be a number of companies for you to choose between and whether you invest in the FTSE 100 or FTSE 250 will depend on if you'd prefer to have your cash in larger companies or smaller ones.

You have to weigh up the varying risks involved. Better established firms will potentially be able to make you more money, but they are also linked with greater risk should people begin to sell quickly and stocks fall. Once you have balanced out the pros and cons, you should be able to come to your answer.

If you can't choose, then the FTSE 350 may be the index for you as it comprises of both the FTSE 100 and the FTSE 250, giving you a wide spectrum of the market.

For an even bigger representation, the FTSE All-Share Index consists of the FTSE 100, FTSE 250 and FTSE Small Cup Indices, meaning that 2,000 businesses on the London Stock Exchange are listed on this index and it covers between 98 and 99 per cent of the British sector.

You can already begin to see that there are many options when it comes to investing money on the stock market and you'll have to decide what is best for you and your family before playing with your cash.

There are many decisions to make at the beginning and you might opt for putting all your money in one place or splitting it between different shares in order to reduce your risk.

However, once you have more experience with stock investment, you are sure to find the process less intimidating and you may even become a pro at anticipating which stocks are going to rise and invest accordingly.

Whatever you decide to do, putting money in shares gives you a good chance of making a nice return on your savings, so why not consider investing in the FTSE group today?
 

Moneyextra.com recommends you take independent financial advice before acting on any article

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2011-07-28 16:48:12 © Moneyextra.com