FTSE 100 vs S&P 500: Comparing UK and US Stock Indices
Introduction:
If you’re comparing stock markets around the world, you’ll often come across the FTSE 100 and the S&P 500. These two indices are the most watched in the UK and the US, respectively. But how do they differ, and what does it mean for investors? This post breaks down the key differences between the FTSE 100 vs S&P 500 to help you decide where to focus your investment strategy.
Overview of Both Indices
| Feature | FTSE 100 | S&P 500 |
|---|---|---|
| Country | United Kingdom | United States |
| No. of Stocks | 100 | 500 |
| Index Type | Market-cap weighted | Market-cap weighted |
| Launch Year | 1984 | 1957 |
| Dividend Yield | Higher (~3–4%) | Lower (~1.5%) |
| Currency | British Pound (GBP) | US Dollar (USD) |
| Sector Focus | Energy, Finance, Healthcare | Technology, Healthcare, Financials |
Geographic Exposure
- The FTSE 100 is composed of UK-listed firms, but many have global operations and revenues.
- The S&P 500 is US-based, but also includes globally diversified firms like Apple, Microsoft, and Amazon.
However, the S&P 500 is more domestically focused in earnings, while the FTSE 100 is more sensitive to global economic trends and currency movements.
Sector Differences
- FTSE 100: Heavy in energy, financials, and consumer staples.
- S&P 500: Dominated by technology and growth stocks.
This difference influences their long-term performance and how they respond to different market conditions.
Performance Comparison
- The S&P 500 has generally outperformed the FTSE 100 over the past two decades, driven by tech innovation and faster US economic growth.
- However, the FTSE 100 often offers higher dividend income and exposure to value stocks, which can perform well in different market cycles.
Volatility and Risk
- The S&P 500 includes more companies and offers greater diversification.
- The FTSE 100 has fewer constituents, so it may be more affected by moves in top-weighted companies like Shell or HSBC.
- Currency risk also plays a role when investing across borders (e.g. USD vs GBP).
Which One Should You Invest In?
Choose the FTSE 100 if you want:
- Higher dividend yields
- Value-oriented and global firms
- GBP-denominated exposure
Choose the S&P 500 if you want:
- Growth-focused exposure (tech-heavy)
- Higher long-term capital appreciation potential
- USD-denominated returns
Many investors choose to combine both for a globally balanced portfolio.
Conclusion
The FTSE 100 and S&P 500 both offer unique strengths. While the S&P 500 leans toward growth and tech, the FTSE 100 provides stable dividend income and international exposure. Your choice should depend on your investment goals, currency preference, and risk tolerance.
FAQs
1. Which index has higher long-term returns?
The S&P 500 has historically delivered higher long-term capital growth.
2. Does the FTSE 100 pay more dividends?
Yes. It typically offers higher dividend yields than the S&P 500.
3. Can I invest in both indices?
Absolutely. Many ETFs and global funds offer exposure to both markets.
4. Is the S&P 500 riskier than the FTSE 100?
It can be more volatile, especially due to its tech-heavy nature, but also more diversified due to its 500 constituents.
5. What currency risks should I consider?
If you live in the UK and invest in the S&P 500 (USD-based), you may be affected by exchange rate fluctuations.
