What is an index? What is a stock market index? List of stock market indices, Major stock market indices Stock index examples
What is an index: An index is an indicator which helps to understand the situation. Measure something by a specific method that represents the level of that thing.
An index is a tool that measures change, and this change serves as an indicator to help predict the future of that group.
In the case of stock markets, stock indexes consist of a hypothetical portfolio of securities representing a particular market or a segment of the stock.
Stock indexes help us to understand whether the market goes up or down, on the basis of stock indexes veterans investor make a decision on what will be the next move in the market, whether should they buy more stocks or not in a particular market segment of the stock market.
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What is a stock market index
A stock market index is a tool that measures the performance of a group of stocks, a stock market index is created by developing a method by grouping several companies together.
It works as an indicator that if the stock market index goes up then all the companies from which this stock index is made will also go up and if this stock index goes down then it is also a sign that all the companies are going down.
More than 2400 companies are listed on New York Stock Exchange (NYSE), same as 7000+ companies are listed on BSE and NSE.
Measuring the performance of the individual stock is very tough and difficult to infer anything from it.
To solve the problem of measuring the performance of an individual stock, the concept of a stock market index comes.
A stock market index is created by applying a function or method to a group of companies, so we track the performance of all these groups of companies together.
In the market index, similar stocks are grouped- Basis on Market Cap ( Large-cap companies), Basis on Sector specific companies ( Bank nifty for banking sector ) etc.
List of stock market indices
- S&P 500
- Dow Jones Industrial Average
- Nasdaq Composite
- Russell 2000
- Capitalization-weighted index
- FTSE 100 Index
- BSE SENSEX
- Nikkei 225
- S&P 400
- S&P 1500
- S&P 600
- CAC 40
- NYSE Composite
- Wilshire 5000
- S&P 100
- Price-weighted index
- S&P/ASX 200
- IBEX 35
- FTSE 350 Index
- FTSE All-Share Index
- FTSE 250 Index
Major stock market indices
There are approximately 1000+ indexes used in the U.S stock market. the most popular indices of the U.S stock market are S&P 500, Dow Jones Industrial Average, and Nasdaq Composite.
S&P 500 is the weightage of the top 500 leading publicly traded companies in the U.s according to their market capitalization.
Dow Jones Industrial Average Index ( DJIA ) is one of the oldest and most commonly followed equity indexes of the U.S stock market. DJIA is an index of 30 prominent companies listed on stock exchanges in the United States.
The Nasdaq Composite is a stock market index that includes almost all stocks listed on the Nasdaq stock exchange.
Stock index examples
- Sensex – Made of the top 30 stocks on BSE.
- The S&P 500 Index – Standard & Poor’s 500 Index, is a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S
Stock indexes help investors track the overall market situation, Looking at indexes investors easy to gauge the current situation of the market. it helps investors to make a sound decision to buy and sell the stock in the market.
Previous data from indexes also help investors to understand the market.