Stocks and shares ISA: why I’m investing in FTSE 250 index funds

Image source: Getty Images Building a balanced and diversified investment portfolio is the gold standard for investors. It’s important to consider investing in a range of different funds in your Stocks and shares ISA. Here, I take a look at why I’m planning to add FTSE 250 index funds and FTSE Small Cap funds to my investment portfolio. What are the FTSE 250 and FTSE Small Cap index?

The FTSE 250 is a share index listed on the London stock exchange . It’s an index for medium-sized companies – sometimes called ‘mid-cap’ companies. The largest 100 UK companies are part of the FTSE 100 , and the 101st to the 350th largest UK companies are part of the FTSE 250.

The FTSE Small Cap index is for listed companies that are smaller than companies listed in the FTSE 100 or FTSE 250. It contains the 351st to the 619th largest companies in the UK. The small cap index still includes some household names like Saga, Bloomsbury Publishing and Topps Tiles. Why am I investing in FTSE 250 funds?

I like to aim for a diversified stocks and shares ISA investment portfolio. That’s why I invest in a mixture of different types of funds and geographies. Investing in funds rather than individual shares means I won’t lose much money if one company goes under or the share price crashes due to financial problems.

Historically, smaller and mid-sized companies tend to perform better than larger companies on average. That’s because smaller companies often have more potential to grow faster in the future than larger companies, which may be at the top of their growth cycle.

Smaller and mid-sized companies may be newer than larger companies and therefore may be expanding more quickly. Investors who buy shares in newer companies have the potential to see […]

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