Stock market indices help investors understand how a market, region, sector or group of companies is performing. Many ETFs track these indices, which makes them a useful starting point for UK beginners learning how investing works.
This guide explains the main indices UK investors are likely to come across, what each one tracks, and how they can be accessed through ETFs.
Capital at risk. The value of your investments can go down as well as up, and you may get back less than you invest. This article is for general information only and is not personal advice.
Key stock market indices: at a glance
| Index | What it tracks | Useful for understanding |
|---|---|---|
| FTSE 100 | 100 large UK-listed companies | Large UK-listed businesses |
| FTSE All-World | Developed and emerging market companies globally | Broad global equity markets |
| S&P 500 | 500 large US-listed companies | The US stock market |
| Nasdaq 100 | 100 large non-financial Nasdaq-listed companies | US growth and technology-heavy companies |
ETFs featured in this article may include paid partners.
What is a stock market index?
A stock market index is a collection of companies, bonds or other assets used to measure how a particular market is performing.
An index can represent:
- A country
- A region
- A sector
- A market size
- A bond market
- A specific investment theme
Investors cannot usually buy an index directly. Instead, they can buy an ETF that aims to track the index.
Why indices matter for ETF investors
Indices matter because they show what an ETF is designed to track. Understanding the index helps investors see:
- Which companies they are exposed to
- Which countries or regions are included
- Whether the ETF is concentrated or diversified
- Which sectors drive returns
- How the ETF might behave in different markets
For beginners, learning the index is one of the simplest ways to understand what an ETF actually owns.
FTSE 100
The FTSE 100 tracks the 100 largest companies listed on the London Stock Exchange. It includes large UK-listed companies across sectors such as:
- Banking
- Energy
- Healthcare
- Consumer goods
- Mining
Many FTSE 100 companies earn revenue overseas, so the index is affected by global growth and currency movements as well as the UK economy.
Example ETFs include iShares Core FTSE 100 UCITS ETF and Vanguard FTSE 100 UCITS ETF.
FTSE All-World
The FTSE All-World Index gives broad exposure to global stock markets. It includes companies across:
- North America
- Europe
- Asia
- Latin America
- Developed markets
- Emerging markets
Because it covers thousands of companies, the FTSE All-World is often used as a broad global equity benchmark.
Example ETFs include Invesco FTSE All-World UCITS ETF and Vanguard FTSE All-World UCITS ETF.
S&P 500
The S&P 500 tracks 500 large companies listed in the United States. It includes major companies across sectors such as:
- Technology
- Healthcare
- Financials
- Consumer goods
- Communication services
For UK investors, the S&P 500 gives exposure to large US companies, but it is not globally diversified.
Example ETFs include Invesco S&P 500 UCITS ETF and Vanguard S&P 500 UCITS ETF.
Nasdaq 100
The Nasdaq 100 tracks 100 of the largest non-financial companies listed on the Nasdaq exchange. It is heavily exposed to technology and growth-focused companies, including areas such as:
- Software
- Semiconductors
- Cloud computing
- Consumer technology
- Artificial intelligence-linked businesses
The Nasdaq 100 can offer growth exposure, but it can also be more volatile than broader indices.
Example ETFs include Invesco Nasdaq 100 UCITS ETF and iShares Nasdaq 100 UCITS ETF.
How to access indices with InvestEngine
InvestEngine is a UK-based ETF investing platform, authorised and regulated by the Financial Conduct Authority, built for long-term investors who want to create DIY ETF portfolios.
With InvestEngine, you can buy and sell index-tracking ETFs with 0% dealing fees and 0% platform fee on DIY portfolios. ETF costs apply.
You can invest through:
- A Stocks and Shares ISA
- A Self-Invested Personal Pension
- A General Investment Account
- A Business Investment Account
Risks of investing through index ETFs
- Market risk: indices can fall in value.
- Concentration risk: some indices are focused on one country or sector.
- Currency risk: overseas holdings can be affected by exchange rates.
- Tracking difference: an ETF may not match its index exactly.
- Emerging market risk: global indices with emerging markets can be more volatile.
- Past performance risk: previous index returns are not a reliable guide to future returns.
FAQs
What is a stock market index in simple terms?
A stock market index is a group of companies or assets used to measure how a market is performing.
Can you invest directly in an index?
Usually no. Investors typically use ETFs or funds that track an index.
Which index is most diversified?
Broad global indices, such as the FTSE All-World, are usually more diversified than single-country indices.
Is the Nasdaq 100 higher risk?
It can be more volatile because it is concentrated in technology and growth companies.
Does InvestEngine charge dealing fees for index ETFs?
InvestEngine charges 0% dealing fees for buying and selling ETFs. DIY portfolios also have 0% platform fees. ETF costs apply.
In summary
Stock market indices help investors understand what different ETFs track. The FTSE 100, FTSE All-World, S&P 500 and Nasdaq 100 each offer different regional, sector and risk exposures.
Capital at risk. ETF costs apply. Tax treatment depends on your personal circumstances and may change in future. This communication is for general information only and does not constitute personal advice.