Introduction to FTSE 100 for Kids and Teens
This video explains what the FTSE 100 is in a simple, concise way for kids and beginners. It could be used by kids & teens to learn about the stock index, or used as a money & personal finance resource by parents and teachers as part of a Financial Literacy course or K-12 curriculum.
Suitable for students from grade levels:
- Elementary School
- Middle School
- High School
The topics covered are:
- What is the FTSE 100
- What are some popular stocks in this stock index
- Who created the FTSE 100
- Why is the FTSE 100 important
- What does its value represent – is it a dollar amount
- What does a change in the value of the FTSE 100 mean
What is the FTSE 100?
The FTSE 100, pronounced ‘footsie’ 100, is one of the most well-known stock indexes in the world.
It was created in 1992, and is made up of the 100 largest companies listed on the London Stock Exchange.
What are some popular stocks in the FTSE 100?
Some popular companies on the FTSE 100 are HSBC, Tesco, Burberry, and IHG.
As you can see, most of these companies are based in the UK.
Who created the FTSE 100?
FTSE 100 was created by the Financial Times Stock Exchange Group, or ‘FTSE’ for short – which gives the index its name.
Just like S&P, FTSE is a private company that creates stock indexes. It is now owned by the London Stock Exchange Group, which owns many other indexes including the Russell 2000.
Why is the FTSE 100 important?
The FTSE 100 is heavily weighted in UK companies, and is a very good measure of how well the UK’s economy is doing.
So, if people want to see the strength of the British economy, they can just look at the FTSE 100.
What does the FTSE 100’s value represent? Is it a dollar amount?
No. The FTSE 100’s value is measured in points.
When it was created in 1992, it had 1,000 points. As of December 2020, it has grown to over 6,500 points.
The point value of the FTSE 100 is calculated using a market capitalization-weighted formula. This means that each stock’s weight in the index is decided by the market capitalization of the company.
For example, if stock A’s company has a market cap of 10 billion pounds, and stock B’s company has a market cap of 20 billion pounds, then stock B would have double the weight – or power to change the value of the FTSE 100 – as stock A, because it has double the market cap.
If the FTSE 100 goes up or down in value, does it mean all its stocks have gone up or down in price?
No. The change in the FTSE 100’s value is a combined effect of the changes in the market cap of all its stocks.