Stock index

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IN PROGRESS

Let's start with the basics. First, a stock index is a "basket" of stocks, designed to reflect the movement of the entire market. In its strictest definition, a broad-based index must have more than ten stocks. There are country indexes and regional indexes, and there are industry indexes, whose stocks reflect a particular industry.

Investors who want the maximum benefit of diversification can invest in securities that have an index or other financial product as their underlying tracking instrument made up of several, well-diversified stocks. Securities based on broad-based indices allow investors to effectively own the same basket of stocks contained in a major index while committing a potentially smaller amount of financial resources.

Stock indexes allow investors to see how a market is doing as a whole. By viewing a stock index, it's a simpler matter to track how stocks perform overall without having to look at all of the stocks and make an assessment.


Thus, for example, the DJIA with just 30 stocks is the smallest in terms of number of stocks in a broad-based stock index, and the Wilshire 5000 Total Market Index was considered the broadest of the "broads" until the Russell Global 10000 was launched in January 2007. Other examples in the U.S. include (but are by no means limited to) the S&P 500, the Nasdaq 100, Russell 1000 Index, Russell 2000 (and 3000), and the Value Line Composite Index. There are numerous indexes, with the Dow, S&P, Nasdaq and Russell the best known in U.S investment circles, and each reflects a market that is different from the other.


Again, indexes are globally created, e.g., the German DAX, the Japanese Nikkei 225, the Hong Kong Hang Seng Index.

How Many Stock Indexes Are There?

 There are countless indexes but, as a young investor, there are really only three that you really need to know about.
 The Dow, commonly referred to as "the Market", is a stock index made up of 30 different stocks. This index has been around for over a hundred years. Since then, the index has risen from 50 up to 10000, where it stands today.
 The is another stock index that tracks stocks that are in the NASDAQ stock exchange. It is currently at around 1200.
 The S&P 500 is probably the most important stock index. It is made up of 500 large, well-known companies like Microsoft. The stock index is currently at about 1100.
 Now that you know a little about stock indices, you can continue on and learn about our very own