One of the thermometers used by experts to monitor the financial health of a country is stock market indices eg. FTSE MIB. Stock market indices are artificially developed indicators that incorporate a basket of stocks. In Italy, the stock market index is called the FTSE MIB and includes 40 companies. Although this is a technical term, you don’t need to be a financial enthusiast to have heard it on TV news, especially in the presence of turbulence on the financial markets. turbulence on the financial markets. So let’s find out what the FTSE MIB is, how it is composed, what its recent performance has been and how you can invest in it.
What is the FTSE MIB Index
The name FTSE MIB is an acronym referring to the Financial Times Stock Exchange Milano Index and represents the main indicator of the price trend of the Italian Stock Exchange, with a basket of 40 companies among the most relevant for market capitalization.
Although it is not the only stock exchange index in Italy (the others are the FTSE Italia All Share, the FTSE Italia Star or the FTSE Italia Mid Cap), it is considered the true point of reference because it provides a more complete picture of the stock exchange’s performance, thanks to the presence of companies with the highest market capitalization, and therefore with a greater specific weight. An increase in the market value of the FTSE MIB index means that the aggregate and weighted value of the 40 listed securities has been positive. In the event of a decline, the opposite obviously applies.
Since this is an aggregate index, we must not make the mistake of thinking that if the FTSE MIB index rises, all of its components also rise: it is possible that a specific security behaves in an anti-cyclical manner with respect to the trend of the index to which it belongs.
Companies included in the FTSE MIB Index
There are almost 500 companies listed on Piazza Affari, yet only a small group of them is part of the FTSE MIB. This is a fact that makes one reflect on the elite nature of this index and, if you like, on its dynamism: considering market capitalization as an entry parameter, no company is precluded from entering the basket.
An important constraint concerns the concentration limit: no company may represent more than 15% of the index. This is a logical choice, established with the aim of avoiding that a single security can significantly influence the index trend.
The FTSE MIB is reviewed in its components every 3 months, but there are also extraordinary reviews, especially in the case of mergers or delisting (i.e. when a company is removed from trading on a stock exchange).
The largest companies by market capitalization included in the FTSE MIB are:
- Enel (capitalization 68.18 billion euros)
- Intesa San Paolo (capitalization 48.63 billion euros)
- Eni (capitalization 48.56 billion euros)
- Ferrari (capitalization 38.98 billion euros)
- STMicroelectronics (capitalization 35.65 billion euros)
- Unicredit (capitalization 29.99 billion euros)
- Assicurazioni Generali (capitalization 28.32 billion euros)
- EXOR (capitalization 17.79 billion euros)
- Terna (capitalization 14.32 billion euros)
- Atlantia (capitalization 13.64 billion euros)
- Campari (capitalization 12.70 billion euros)
- Telecom Italia (capitalization 8.59 billion euros)
Chart and Quotation
An aspect that it is important to study before evaluating an investment in equities concerns graphical analysis. It is specifically a study focused on the observation of graphs, in fact, and is widely used by most traders. Through this analysis it is possible to reach conclusions and reliable forecasts regarding the future trend of the FTSE MIB index.
From a purely graphical point of view, it is possible to observe that the value of any index varies continuously (even if it is a less volatile instrument than the single share). The trend of the FTSE MIB in the last 12 months has seen a performance of 21.08%, benefiting from the arrival of Draghi at Palazzo Chigi in February 2021, which has transmitted positivity and optimism to the financial markets.
How to Buy FTSE MIB Stocks
The reason why the vast majority of investors in Italy focus on the stocks included in the FTSE MIB index is essentially twofold. Firstly, these stocks have a very high daily trading volume; secondly, as this is a very selective index, it includes very solid companies. For these reasons, the shares of the FTSE MIB index are traded by various types of investors: both those who want to take advantage of short-term misalignments and those who want to adopt a drawer approach.
Before trading FTSE MIB shares it is important to evaluate which are the most reliable and regulated brokers. One of the most valid solutions is represented by the broker eToro, an online platform that allows you to trade on stock CFDs of the Italian Stock Exchange, taking advantage of commissions that are much more competitive than those provided by a bank. Thanks to eToro you can choose between all 40 stocks of the FTSE MIB, taking advantage of the possibility to start from a demo account to gain experience or to turn to CopyTrading to copy the strategies of veteran traders.
Future Forecast: Opportunities and Risks
In light of what has been analyzed, a question arises spontaneously: is it worthwhile investing in the FTSE MIB today? The answer is not so trivial. The FTSE MIB index went through a particularly delicate phase (as did all world stock exchange indices) during the first phase of the pandemic in March 2020, which led to an important wave of sales. The situation then gradually calmed down, leading to a bullish phase that coincided with the fall of the Conte government and the arrival of the Draghi government.
At present, investing in FTSE MIB shares from a medium-long term perspective could represent a reasonable choice, even if it is important not to neglect the presence of some variables, such as the increase in inflation, the arrival of new variants and the consequent fear of the adoption of new restrictive measures.