Jasmine Birtles
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How to Invest in the FTSE 100 in 2025
Ruby Layram
20th Jun 2025
The FTSE 100 is one of the most talked-about stock indexes in the UK, and for good reason. It’s full of big-name companies, pays decent dividends, and gives you exposure to a broad slice of the British economy. If you’re wondering how to invest in it (and whether it’s worth it), you’re in the right place.
In this guide, we’ll explain what the FTSE 100 is, how to invest in it as a UK investor, some alternatives you might consider, and the key things to watch out for before you dive in.
What Is the FTSE 100?
Let’s start with the basics. The FTSE 100 (pronounced “Footsie”) is a stock market index made up of the 100 largest companies listed on the London Stock Exchange. It includes big, well-established businesses like Unilever, AstraZeneca, Shell, and HSBC.
It’s often used as a barometer for how the UK economy is doing, though many FTSE 100 companies earn a big chunk of their money overseas. So, while it’s UK-based, it’s impacted by global affairs.
Why Invest in the FTSE 100?
The FTSE 100 is one of the most popular index-tracking funds amongst UK investors. Here are a few reasons why you might want to add it to your watch list!
1. Diversification: Investing in the FTSE 100 gives you instant exposure to 100 different companies across a range of industries, from pharmaceuticals to oil to consumer goods. It’s an easy way to spread your risk without having to pick individual stocks.
2. Income potential: The FTSE 100 is known for its dividends. Many of the companies in the index regularly pay out a chunk of their profits to shareholders. So, if you’re looking for income from your investments, it could be a good option.
3. Long-term growth: While the FTSE 100 can be a bit slower-growing compared to flashy US growth stocks, it has historically delivered steady returns over the long term. It’s a bit like the tortoise in the race, slow, steady, and reliable.
4. Pound-cost averaging: If you’re putting money into the market regularly (say, monthly), investing in the FTSE 100 can smooth out the ups and downs. You’ll buy more when prices are low and less when they’re high, a smart move in volatile times.
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How to Invest in the FTSE 100
There are a few different ways to invest in the FTSE 100, depending on your style and preferences.
1. Use a FTSE 100 Index Fund or ETF
This is the easiest and most popular way. Exchange-traded funds track the performance of the FTSE 100 and aim to mirror it.
Some popular options include:
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iShares Core FTSE 100 UCITS ETF (ISF)
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Vanguard FTSE 100 UCITS ETF (VUKE)
-
Legal & General UK 100 Index Fund
You can buy these through investment platforms like:
Just open an account, deposit your funds, search for the fund or ETF, and hit buy.
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2. Buy Individual FTSE 100 Shares
You can also pick and choose individual companies from the index, like BP, Tesco, or GlaxoSmithKline, but this takes more research and management.
It can be a great way to build a custom income investing portfolio if you’ve got the time.
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Alternatives to the FTSE 100
The FTSE 100 isn’t the only UK index-tracking fund to consider in 2025.
FTSE 250
The FTSE 250 tracks the next 250 biggest companies after the FTSE 100, often smaller, UK-focused, and faster-growing businesses.
These companies often come with more growth potential, but also higher risk!
Global ETFs
If you want to spread your wings beyond the UK, look at global ETFs like:
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Vanguard FTSE All-World ETF (VWRL)
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iShares MSCI World ETF (IWRD)
Thematic funds
Want to back a trend instead of a region? Look into funds that focus on clean energy, tech innovation, or healthcare.
Thematic investing is a great way to put your money behind a cause your sector that you truly believe in, which is ideal for people who want to avoid accidentally investing in something that doesn’t align with their beliefs or goals.
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Things to Consider Before Investing in the FTSE 100
Before you go all in, keep these things in mind:
Currency exposure
Even though it’s a UK index, many FTSE 100 companies earn in dollars, euros, and other currencies. This can be a blessing (or a curse) depending on the pound’s strength.
Lack of tech
If you’re looking for high-growth tech stocks, you won’t find many in the FTSE 100. It leans more toward traditional sectors like oil, banks, and utilities.
As I mentioned above, growth-minded investors might want to look into the FTSE 250 or small-cap index. These funds contain newer, less-established companies that haver oom to grow.
Fees
Make sure you compare fund fees (also called the ongoing charges figure or OCF). Even small differences in fees can add up over time.
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Final Thoughts
If you’re looking for a simple, low-cost way to invest in large UK companies with a track record of paying dividends, the FTSE 100 is worth a look. Whether you’re just starting out or adding a new layer to your portfolio, a FTSE 100 tracker fund or ETF can be a solid building block.
Of course, like all investments, it’s not without its risks, so always do your research and think about how it fits with your broader goals.
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Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies, are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence. Companies listed above are not necessarily endorsed by Money Magpie. When investing your capital is at risk.
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