What is the stock market index?
Trading with stocks and financial investments in the stock market are serious business. Anyone who has significant financial assets associated with world stock markets often pays special attention to the specific stock market index. The stock market index is to define the relative value of the shares that consist of a specific market sector, such as heavy industry, technology, telecommunications, health care, etc.
The index of any kind is essentially an aggregate. The stock market index is therefore composed of a combined performance of a certain summary of individual shares of publicly traded companies that best represent this particular market sector. This sector could consist of hundreds of different publicly traded companies, or up to thirty years and 500 500 indexes (S&P 500), which monitors US stocks with large and medium capitalization, is one of the most famous examples of the stock market index. Perhaps the most quoted shares index is the Dow Jones Index, which powerful power exclusively large capitalH Stocks A is a first -class focus of the New York Stock Exchange (NYSE).
The stock market index should not be confused with the stock market average. The stock market average reflects the entire market, while the stock market index reflects a deviation from statistical standards for a specific market segment. The stock market index can be appreciated on the basis of a number of different factors, while the average is only any reflection of this value on the market as a whole.
Weighing the stock market index is the classification of the index value through the formula used to determine its price. Different methods are used to weigh the market index. It can be the price weighted, such as the Dow Jones Index, where the price of each share is determined by the value of the index price. In this case, the price gain or loss Evan one stock can affect the value of the entire index. Conversely, for the Dear Market Index, the price of the index is balanced due to the number of shares in the index, unlike the collective HODnoty shares.
Diversification through the financing of the market index provides a relatively low -resistant method of investment in shares. The financing of the index involves investing small amounts of capital in a wide cross -section of individual shares within the index. These shares are connected together in the portfolio and the sharp profit or loss of one particular shares will not significantly affect the overall performance of the index. Mutual funds are the most common form of index financing.