Most ASX investors would be familiar with our flagship S&P/ASX 200 Index (ASX: XJO). But fewer would know about the FTSE 100 Index (FTSE: UKX).
And fair enough too. The ASX 200 covers companies we all know and love (maybe love is a bit strong…), like Woolworths Group Ltd (ASX: WOW), Afterpay Ltd (ASX: APT) and Commonwealth Bank of Australia (ASX: CBA).
If those aren’t household names for you, I don’t blame you. But they might be in the United Kingdom. The FTSE 100 is Britain’s flagship index, much like the ASX 200 is our own. And like the ASX 200, the FTSE 100 covers 100 of the largest companies on the London Stock Exchange.
So why might you want to invest in the FTSE 100?
Well, there are a few reasons. The first is diversification of course. The ASX is a fine market, but it represents just one country. Investing outside of Australia will always reduce your portfolio’s exposure to Australian risks and problems, such as currency movements or economic issues.
Secondly, the FTSE 100 is home to companies that don’t have any equal here on the ASX. We don’t have a global consumer staples giant like Unilever, for instance. Or a global alcohol company like Diageo (owner of many famous brands like Johnny Walker).
Vaccine maker AstraZeneca plc (LON: AZN) also calls London home, as do oil giants BP plc (LON: BP) and Royal Dutch Shell plc (LON: RDSA) (LON: RDSB). The FTSE even has a tobacco giant in British American Tobacco plc (LON: BATS).
These companies might not be everyone’s cup of English breakfast tea, but there’s no doubt they are very different to the ASX’s largest holdings.
How to invest in the FTSE 100 on the ASX
Many ASX brokerage platforms offer the opportunity to buy UK-listed shares, including those from the big ASX banks for a start.
But there’s another (some might say easier) path to the FTSE 100.
The ASX is home to an exchange-traded fund (ETF) that exclusively tracks the FTSE 100. It is the BetaShares FTSE 100 ETF (ASX: F100). This ETF mirrors the index and holds all 100 of its constituents, including the companies mentioned above. It charges a management fee of 0.45% per annum for the privilege. So if you want to invest in the FTSE 100 Index, that’s probably your easiest option.
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Sebastian Bowen owns shares of Betashares FTSE 100 ETF. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Diageo, HSBC Holdings, and Unilever. The Motley Fool Australia owns shares of AFTERPAY T FPO and Woolworths Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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