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.

---

How to Find Value in No Load Mutual Fund Investing

What are you thinking when it comes to your no... Read More

A Penny for Your Stocks

According to Investopedia Inc. the penny stock market has seen... Read More

Diversification

Wall Street's watchword has always been diversification, but what does... Read More

Price Targets

Every day in any financial publication you will find the... Read More

Successful Trading ? Taking Profits - Part 2

Suppose your position has made a big move and you... Read More

3 Components Needed for Beating the Market

Time to look back2004 is over, now we are in... Read More

Parachute Investing

Ever jumped out of an airplane? It's OK if you... Read More

9 Deadly Trading Mistakes!

The following are a list of nine things you want... Read More

12 Basic Stock Investing Rules Every Successful Investor Should Follow

There are many important things you need to know to... Read More

How to Pay Less and Get More: Discount Broker vs Professional

How do you invest? What do you really pay? At... Read More

Good News?

As the man said, "I've got some good news and... Read More

Trading Baskets II: The Crapolio, A Roll of the Dice in the Stock Market

In a previously written article, we expanded the use of... Read More

Overvalued & Underbought

With all the bad news that has been dumped upon... Read More

A Stock Market Investment Plan that Never Lets You Down

The bulls and bears of the stock market are both... Read More

Time Out

Are you paying any attention to your retirement savings? Do... Read More

Downdraft

For the year 2000 we have seen hundreds of mutual... Read More

Selection Vs Direction

As I have said many times before in this column... Read More

Why Change Funds?

On November 17 I bought 7 different mutual funds and... Read More

The Secret to More Winning Trades is as Simple as Avoiding This Common Mistake

If you're a normal human being, your need to feel... Read More

Stock Market Volatility

In my opinion, due to the volatility of stock market... Read More

Oil Stocks As A Long Term Investment

The demand for world oil is increasing while world reserves... Read More

The Shadow

The Shadow knows. There used to be a radio program... Read More

What Can Model Airplanes Teach You About Trading?

I was devastated!I just couldn't believe it. I was 10... Read More

Big Buildings Can Mean Big Economic Disaster

AS BUILDERS BEGIN WORK ON THE FREEDOM TOWER in New... Read More

What the Hell is a Stock option?

A 'stock option' is a contract between two parties giving... Read More

Rebalance And Diversify

The stock market has not been very kind to your... Read More

A Personal Stock Market Investment Philosophy

∙ Make every investment in the stock market a long-term... Read More

Market Experience of a Naïve Stock Operator

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

Lemmings Are Gathering

Before they go over the cliff to their destruction these... Read More

Hot Stock Trader: How to Pick Momentum Stocks with Ease and Simplicity

Most stock traders know that momentum trading can be a... Read More

Good Stock Market Tip; Good Return!

Forget making a profit; instead focus on the income provided... Read More

Investment Research - The Dalbar Study

Very few people, even professionals, have heard of the Dalbar... Read More

Mr. Market

I constantly hear the talking heads on CNBC-TV, the radio... Read More