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EasyJet lands back in the FTSE 100

Jonathan Wright

Jonathan Wright - Fidelity Personal Investing

Budget airline easyJet has returned to the FTSE 100 after being relegated six months ago.

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Following the latest quarterly re-shuffle of the UK’s top companies, the low-cost carrier has swapped places with Hiscox, the insurer, which now finds itself in the FTSE 250.

Hiscox, which first entered the FTSE 100 in December last year, has been hit hard by an increase in claims following recent extreme weather events experienced in the US, Caribbean and Japan. In a trading update last month the company said it was setting aside $165m to cover probable insurance claims as a result of severe weather.

EasyJet’s path back into the Footsie has not been an easy ride for investors. Brexit uncertainty, a sustained period of higher oil prices and a weak pound - making holidays abroad more expensive - have been tough headwinds the company has had to face.

However, the collapse of Thomas Cook airlines and strikes at Ryanair and British Airways have boosted passenger numbers. The company has also added more aircraft and focused on cutting costs which has strengthened the share price enough to secure its re-entry into the UK’s largest stockmarket index.

The experiences of easyJet and Hiscox demonstrate that once in the FTSE 100 there’s no guarantee a company will stay there for long. EasyJet first joined the Footsie in 2013, before falling out in June this year, while Hiscox entered the top index for the first time last December.

Each quarter a review takes place and according to the rules of the FTSE Russell reviews committee, FTSE 100 companies that have fallen to 111th position or worse are demoted. Conversely, FTSE 250 companies that would make 90th position or above in the FTSE 100 based on their market size get promoted.

Consequently, over the past 35 years the FTSE 100, like the UK economy, has continually evolved. Back in 1984 the index featured many household names aimed at the domestic market. Then came the nationalisation of many state industries which changed its composition over the 1980s.

Now of course the index is far more international than it once was, with more than 75% of FTSE 100 companies generating their earnings from overseas. With such a large presence of multinationals it’s no longer an indicator of the true state of the domestic UK economy.

Currently financials, pharmaceuticals and oil and gas companies feature heavily in the index with HSBC, BP, Shell, AstraZeneca and GlaxoSmithKline holding the top slots.

Many investors looking for a low-cost way to access the performance of an index turn to tracker funds which aim to follow the ups and downs of a particular market.

Rather than focus on the top 100 companies, to get a broader, more diversified spread of companies, many UK tracker funds follow the FTSE All-Share Index which is made up of over 600 London-listed companies. The Fidelity Index UK Fund does exactly that, with an extremely low ongoing charge of just 0.06% per year.

Find out more on the Fidelity Index UK Fund

Important information: The value of investments and the income from them can go down as well as up, so you may get back less than you invest. Investors should note that the views expressed may no longer be current and may have already been acted upon. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.

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