Two reasons to avoid Footsie trackers

Investors tend to think of the FTSE 100 as being low risk, in terms of stock market investing. But a trawl through the history of the UK's blue-chip index shows its pedigree is far less sound than you might expect. Max King, strategist at Investec, explains why investors of all stripes would be better off avoiding funds which track the Footsie - and suggests two more suitable investment options...

Every quarter, two or three under-performing constituents drop out of the FTSE 100 index and are replaced. As in the Premier League, it seems that most of those who exit soon return, and most of those who are promoted depart a few quarters later. Only the takeover victims disappear for ever.

Over time the changes build up, and the FTSE 100 has changed a great deal since it was first constructed 22 years ago. The combined market value of the initial 100 companies was just over £100 billion and the index was based at 1,000. It briefly dropped below 1,000 in mid-1984, and reached a peak of 6,930 at the end of 1999.

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