What’s Going On Here?

FTSE 100 (comprises the UK’s biggest public companies by values) will “rebalance”: some stocks will become popular while others slide out of fashion.

What Does This Mean?

• FTSE 100’s performance can help investors gauge the health of British firms and the economy, which is regularly updated to welcome and boot out companies.
• Retailer JD Sports might join the index after its share price sprinted.

Why Should I Care?

For markets: Passive is now massive.

• The share of “passive” funds (which track the performance of stock market indexes often via exchange-traded funds (ETFs)) – is growing larger.
• Keen-eyed “active” investors may have already bought up individual UK stocks, hoping to profit from fresh demand for them from passive funds mirroring the updated index.

For you personally: Keep an index of indexes.

• If you’re invested in an ETF that tracks a changing index, your underlying investments will also shift.
• Stocks heavily owned by ETFs tend to:
  • rise more than a rising market – by greater demand for those stocks;
  • drop less than a falling market – by slower selling of ETFs compared to individual stocks.

Content source: Finimize. (2019) Stocks Stand Up To Be Counted. [Online] Available from: https://www.finimize.com/wp/news/stocks-stand-counted/ [Accessed 5 June 2019]