Stock market indexes, calculate the worth of a particular market segment. A weighted average of the prices of particular stocks that are part of the actual category they represent is used to calculate them. Stock indices can represent a particular stock market, like the NASDAQ, or a specific group of a country's largest corporations, like the S&P 500 in the United States, the FTSE 100 in the United Kingdom, or the Nikkei 225 in Japan.
Stock market indexes, calculate the worth of a particular market segment. A weighted average of the prices of particular stocks that are part of the actual category they represent is used to calculate them. Stock indices can represent a particular stock market, like the NASDAQ, or a specific group of a country's largest corporations, like the S&P 500 in the United States, the FTSE 100 in the United Kingdom, or the Nikkei 225 in Japan.
Indices measure the performance of a group of stocks. Indexes, rather than focusing simply on a single company's development or performance, allow you to measure a market's overall health and strength, and you've definitely heard of them in the news. You may have heard them called stock indices, share indices, or just the stock market. Different indices track various types of equities. In the United States, indices such as the Dow Jones, NASDAQ, and S&P 500 measure the performance of the New York Stock Exchange and include virtually all of the top firms in a variety of industries, including technology, banking, health, and many more. Some indices cover a wider region or continent, while others focus on a specific sector or business.
Here are some of the most popular indices: Wall Street (reflects Dow Jones): The 30 ‘blue-chip’ companies on the New York Stock Exchange, including Apple, Intel, Exxon Mobil and Goldman Sachs S&P 500 (US SP 500): the most widely used measure of the US stock market, the Standard and Poor’s (S&P) tracks the prices of the biggest 500 companies listed on the New York Stock Exchange and the NASDAQ. It includes all the companies listed on the Dow, plus 470 others FTSE 100 (UK 100) the FTSE tracks the prices of the biggest companies by market capitalization listed on the London Stock Exchange. The largest companies in the index are usually found in the mining, energy (particularly oil and gas) and financial services sectors DAX (Germany 40): the DAX follows the shares of the largest 40 companies listed on the Frankfurt Stock Exchange in Germany. The DAX index is dominated by the financial, automotive, healthcare and chemicals sectors, with key components including Allianz, BMW, Bayer and Siemens Nikkei 225 (Japan 225): This is the main stock market index for Japan, tracking the shares of 225 companies listed on the Tokyo Stock Exchange
There are two different ways in which indices are calculated: either by market capitalization (more common) or by price-weight. Market capitalization indices Market capitalization indices calculate an entity's impact on the index by totaling the market value of its outstanding shares. As a result, larger organizations, or "large caps," will have a stronger influence on the index's overall value than midsize or tiny businesses. Indexes with market capitalization include the S&P 500, FTSE 100, and NASDAQ. Price-weighted indices Price-weighted indices use an organization's share price to determine how much it can affect an index. To put it another way, companies with higher share prices will have a greater impact on these indices. The value of a price-weighted index is calculated by summing the share prices of all of the index's stocks and dividing by the total number of stocks. Examples of price-weighted indices: Dow Jones, Nikkei 225
Diversification: rather than relying on a single stock, an index gives you exposure to a broad section of the market at once. Lower volatility: indices are usually less volatile than other asset classes, with their price movements balanced by the number of companies they track. Accessibility: rather than performing fundamental analysis on a niche stock to see if it’s undervalued, indices are a broader reflection of the overall economy.
A stock index’s price is determined by the movements of the shares it tracks. Here are a few factors to watch out for when deciding what might move stock markets. The political climate: politics can have a significant impact on stocks. Elections can mean a change of policy that could bring headwinds or tailwinds for business, international tension could bring tariffs and more. Company announcements: a new CEO, merger or earnings release at a key stock will often play out on the index it tracks. Economic data: employment data, central bank announcements and inflation rates all offer clues to how an economy is performing – and demand for shares in strong economies is often higher. Industry news: if a headline impacts several large companies in a sector – e.g., mining or banking – then expect it to impact their broader index too