The FTSE 250 is a stock market index comprising the next 250 largest companies by market capitalisation on the London Stock Exchange, following the FTSE 100. Often referred to as the UK’s mid-cap index, it offers a snapshot of the country’s dynamic and growth-oriented businesses. Unlike its larger counterpart, the FTSE 250 is heavily domestically focused, making it a more accurate barometer of the UK’s economic health.
Composed of a diverse range of companies across various sectors, the FTSE 250 is a popular choice for investors seeking exposure to the UK’s growth potential. Its composition tends to be more volatile than the FTSE 100, reflecting the higher risk and reward profile of mid-cap companies.
Latest Price, Chart & Dividend Yield
After a dip from 2021 to 2023, the FTSE 250 has managed to push higher so far this year, currently up 12.3% in the last 12 months of trading.
Dividend Yield: 3.17%
FTSE 250 Price Forecast
The FTSE 250, as a barometer of the UK’s mid-cap companies, is often seen as a more preferred indicator of the UK economy compared to the FTSE 100. However, its future direction is subject to various economic and market factors. Here are the bull and bear arguments.
The Bull Argument: The FTSE 250 is a more domestically focused index, so it stands to benefit from the UK economy’s performance. The Bank of England is expected to cut rates soon, which could boost the index. Lowering rates would benefit the constituent companies by increasing domestic demand. Additionally, the index’s composition of growth-oriented companies positions it well to capitalise on economic expansion.
The Bear Argument: On the other hand, the weighting towards the UK economy could expose it to risks. Persistent economic challenges could continue to dampen consumer spending and business investment, negatively impacting the index’s performance. Additionally, geopolitical uncertainties can create headwinds for the FTSE 250 companies, leading to a downward pressure on the index. Furthermore, we have recently seen a rise in companies leaving the London Stock Exchange. This could result in a significant weakening of the index if more FTSE 250 names decide to move their primary listing elsewhere.
Who Should Buy the FTSE 250
The FTSE 250 offers exposure to the UK’s mid-cap companies, which can provide different investment characteristics compared to the FTSE 100. Understanding who might benefit from investing in the FTSE 250 is crucial. Here’s a breakdown of investors who may find the FTSE 250 attractive:
Growth Investors: The FTSE 250 is often seen as a more growth-oriented index compared to the FTSE 100 , with companies that have the potential to expand rapidly. Investors seeking capital appreciation may find it appealing.
UK Economy Bulls: Given the FTSE 250’s heavier weighting towards domestically focused companies, it can be a good proxy for the UK economy’s performance. Those optimistic about the UK’s economic growth may consider this index.
Diversification Seekers: While not as globally diversified as the FTSE 100, the FTSE 250 can still offer diversification benefits within the UK market.
Long-Term Investors: The FTSE 250 has historically performed slightly better than the FTSE 100 over longer time periods, making it a potential choice for those with a long-term investment horizon.
Higher Risk Tolerance: It’s important to note that the FTSE 250 is generally considered more volatile than the FTSE 100, so investors should have a higher risk tolerance.
Trading The Index
FTSE 250 Top 10 Companies
The FTSE 250 constituents are reviewed quarterly.
| Company | Market Cap (As of July 29, 2024) |
|---|---|
| Hiscox | £4.28 Billion |
| Tritax Big Box Reit | £4.08 Billion |
| Investec | £3.86 Billion |
| RS Group | £3.80 Billion |
| British Land | £3.74 Billion |
| Polar Capital | £3.63 Billion |
| Ocado | £3.59 Billion |
| IG Group | £3.47 Billion |
| Inchcape | £3.47 Billion |
| Alliance Trust | £3.43 Billion |
Source: LSEG
