Understanding Stock Market Indexes

A stock market index is a statistical measure of changes in the securities markets. An index represents a portfolio of securities traded on the market that is considered to be reasonably representative of the market as a whole. Each index has its own method of calculation. It is generally expressed as a change from its base value. For a better understanding of the stock market, an index should be read not at its absolute numerical value but at the percentage change in its numerical value. One cannot invest in an index directly. However, you can invest in index related mutual funds.

Popular indexes in the US

The Standard & Poor's 500 Index ? The S & P 500 index

This index is the most popular index in the world. The S & P 500 index consists of 500 stocks chosen on the basis of industry, market capitalization, liquidity and other factors. It is a leading indicator of US stocks. The index does not include speculative stocks.

The Dow Jones Industrial Average (DJIA) ? popularly known as the Dow

This index consists of 30 significant stocks traded on the New York Stock Exchange (NYSE) and the NASDAQ. It includes companies such as Microsoft, Exxon Mobil, Disney, and General Electrical. The index does not include speculative stocks.

The Dow Jones Utility Average (DJUA)

The DJUA is more of a sector based index as it is a price-weighted average of 15 utility stocks traded in the US. It is sensitive to interest rate changes as utility companies tend to borrow a great deal of money.

The Russell 2000 Index

This index consists of 2,000 small company stocks that are included in the Russell 3000 index. It serves as a bench mark for small company stocks in the US.

Wilshire 5000 Total Market Index (TMWX)

This index measures the stock performance of all US headquartered equities for which price data is readily available. It is one of the broadest stock market indices. It includes equities of more than 7,000 companies traded on US Stock Exchanges.

The Nasdaq Composite Index

It tracks companies traded on the Nasdaq Stock Exchanges. The index consists of stocks of more than 5,000 companies traded on Nasdaq. Most of these companies are technology companies. However, you will find companies in the financial, industrial, transportation and insurance sectors. It also consists of many speculative companies.

Read More Free Investment, Wealth Creation & Personal Finance Articles & Tutorials at: http://www.global-investment-institute.com

The Global Investment Institute has been setup to aid people in the pursuit of a better lifestyle through managing their money effectively, investing wisely and wealth planning for their future.

---

Stock Trading Secrets?

How often have you come across an advertisement or e-mail... Read More

Getting Even

I know there are a lot of you out there... Read More

How to Short Stocks? How to Make Money when Your Stocks Go Down by Shorting

The stock market can present you with a lot of... Read More

A Good Fund Manager

Every Wall Street analyst, financial planner and broker will tell... Read More

When Should I Sell?

People are always asking me when should I sell my... Read More

Lights of the Stock Market

There are red lights, green lights, blue lights and spot... Read More

An Old Proverb for Investing

"If you don't know where you are going, any road... Read More

Starbucks Stock is Up

Starbucks earnings are up again and so is their stock... Read More

Investment Clubs

Because you don't feel too sure about which stock or... Read More

Discover the Retirement Breakthrough the Federal Government Created for You - The Roth IRA!

If you don't know what a Roth IRA is then... Read More

Frog In The Pot

You remember the story about the frog that was put... Read More

Alfred E. Newman

What! Me worry?Many of you remember the cover of MAD... Read More

Protectionism

First let's see what protectionism is. According to Mr. Webster... Read More

How to Maximize Your 401k Mutual Fund Returns

When it comes to 401k's there is an overabundance of... Read More

Investing in Trash Company Stocks

Refuse is a serious issue in any society, about as... Read More

Will the Stock Market be Lower in October?

The stock market often closes a week in the middle... Read More

Intervention

Intervention. Now don't let that big word scare you. The... Read More

Stock Investment Advice

Stock investment advice is easy to find. Do you get... Read More

10 Tips For Creating Wealth From the Stock Market

1. Do not spread your money too thin.My friend has... Read More

Eternal Sunshine

There is a current movie entitled "Eternal Sunshine of the... Read More

Again With the Bubbles?

A few years back ? it seems like an eternity... Read More

Bottoms Ups

If you have talked to a stock broker or financial... Read More

How Much Information Do You Need?

You have decided to buy some stock or mutual funds,... Read More

Trading Tips No 5: Stock Trading Curve Drawdown and Commitment

All stock trading and investing methods must deal with the... Read More

Stock Market Investments

If there is one term over-used when talking about making... Read More

The Next Bull Market

We are already in it, but you can't see it.... Read More

Market Experience of a Naïve Stock Operator

Sometime in the third quarter of 1997, someone told me... Read More

Are You A Stockaholic?

Today's society gives special recognition to alcoholics, sexaholics, binge-aholics, shopaholics,... Read More

How To Make, And Keep, Money Trading Stocks

If you are serious about making and keeping money by... Read More

Why This Bear?

People are constantly asking me why is the stock market... Read More

Where Is The Beef?

Where is the beef? Or maybe it should be where... Read More

Traders, Defend Against the Dreaded Death Spiral.

It has often been said that there is only two... Read More

Choosing An Investment Stock Broker

If you want one.And I don't recommend any broker with... Read More