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Is the FTSE 250 full of bargains investors are overlooking? 

ROSIE MURRAY-WEST, FINANCIAL MAIL ON SUNDAY, 23 April 2022:

Below the stalwarts of the FTSE 100 – the index of Britain’s biggest companies by market capitalisation – lies the lesser known FTSE250 Index…

The FTSE250 has so far underperformed its big brother this year. While the FTSE100, comprising the likes of BP, Next and Royal Mail, is up by nearly 1 per cent, the FTSE250 has fallen by about 12 per cent.

Although not a good start to the year, investment experts point out that this means there is value to be had in this ‘Goldilocks’ index, where the companies are neither too big, nor too small – but just right…

A disappointing year so far

The underperformance of the FTSE250 so far this year is a reflection of the different make-up of the two indices – and how they have reacted to the brutal war in Ukraine and the UK’s economic situation…

Jason Hollands, managing director at wealth platform BestInvest, points out that if you invest in a tracker fund replicating the performance of the FTSE All-Share Index, you get exposure to just over 600 companies.

Although this suggests you have a spread of risk in term of diversification, you actually end up with more exposure to three FTSE100 companies than to the whole midcap company sector.

This is because even though 250 of the All-Share stocks are FTSE 250 companies, the tracker funds allocate your money according to the size of each company…

The FTSE 250 stocks to pick

One way to get exposure to this index is to buy shares in individual companies. The FTSE250 contains many household names that excite analysts…

What about funds based on the index?

If you are not comfortable picking stocks yourself, using a UK investment fund is a good way of gaining exposure – and makes sense if you do not consider yourself an investment expert.

James Carthew, head of investment companies at financial information service QuotedData, recommends three stock market-listed investment trusts: Mercantile, JPMorgan Mid Cap and Schroder Mid Cap. These have all lost money recently – down 15 per cent, 15 per cent and 13 per cent over the past 12 months respectively, but up 17 per cent, 9 per cent and 18 per cent over three years.

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