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FTSE 100 is one of the largest indexes of 100 public companies. It represents the number represented by a group of shares. It helps to provide diversification to investors who want to cover multiple sectors through one index. It reduces the risk created by weakness in a particular sector and ftse 100 share price index.
The companies in the list are carefully selected where multiple criteria like the company’s market capitalization, nationality, and liquidity are taken into consideration. Investment in FTSE 100 does not provide privileges like voting rights or dividend payments. They may offer an average dividend, which makes it attractive.
Warren Buffett provides the best tips on how to invest in FTSE 100. He not only built up a net worth of over $80bn by investing in shares, but he also generated attractive returns.
Buffet style investing in shares and his choices are widely copied by others who want to get a competitive advantage in FTSE 100 stocks. He says – “The most important thing is to find firms that have a wide and long-lasting moat around it.”
He prefers popular brands as there are many advantages of such options, which can provide a competitive edge. The companies providing higher returns on equity can help to provide the ability of the invested money to generate returns, which is preferred over others.
One should try to avoid investing in shares having higher debt levels as such firms can lose in the market when the economic conditions are weak.
Also, check the liquidity and funds available with the company to cover the short-term liabilities.
Some of the shares having an attractive debt to equity ratio and attractive five-year average ROE are Hargreaves Lansdown and Smith & Nephew.
There are alternative investments like ETFs but one needs to be cautious in making any such investment. ETFs provide low-cost methods as it does not involve stamp duty and active traders have to pay a very low charge for trading.
The top companies in the FTSE 100 list include Royal Dutch Shell (RDS) that is an oil firm. Despite the crisis in crude markets, the share price of the company continues to increase and the average returns of five years delivered are 50%.
HSBC was second largest on the FTSE 100 list where the shareholder saw attractive returns.
The growth in the rates of gold created fear in the market where the investors expected negativity at some time, and they got cautious and were trying to collect defensive assets. In such conditions, trading through FTSE 100 can provide an opportunity to take advantage when the indexes are volatile.
One can trade through leveraged products, which provides exposure to a market where only a fraction of the capital is invested to get the margins like index, stocks or ETFs by using the derivatives, futures, CFDs or spread bets.
Those who want to trade and not invest can use the leveraged products where one does not have to pay tax like capital gains or stamp duty, and one can offset the losses against the gains.
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