The S&P 500, NASDAQ, Dow Jones, Russell, and Wilshire arenames of the market most popular index. There are many indexes, but in this article, we are covering only well-known indexes in the world. An index provides a review of the market by analysing some top shares in that market. It tries to provide an overview of the market that where the market trend is going.
It is not necessary that one index keeps the record of high stocks, but every index keeps a track on a few stocks or one. Companies can be listed in more than one index, as some of the largest companies are listed in the S&P 500 are also in the Dow Jones Industrial Average
The process of indexing started from Charles Dow. He created the first index by averaging the prices of 12 stocks; from there, he analyzed that he can track the overall stock market.
He analyzed one more thing that he can explain the movements of the general stock market that were not part of his Analysis
This index is named as S&P 500 because it includes 500 large companies of USA, and S&P stands for the market research firm Standards and Poor’s The stocks in the S&P 500 index represent roughly 70% of all publicly traded stocks. if the total market value of all 500 companies in the S&P 500 drops by 15%, the value of the index also drops by 15%.if some companies price went up and some fall by the same percentage then the overall impact on S&P 500 will not be greater
Dow Jones Industrial Average (DJIA)
Dow Jones Industrial Average name comes because of Dow jones, and this index tracks the 30 largest U.S. companies, DJIA is known among the beat healthiest index although it only represents 25% of total stock.
A percent change in the DJIA should not be interpreted as a indication that the entire market has Increased or dropped by the same percent. This is because of the Dow’s price-weighted function. And also because of the size of the market.
The Russels 2000
The Russels 2000, the index includes 2000 smallest companies. It is an opposite index of Dow Jones because Dow Jones only includes top, largest companies, and Russels 2000, contains 2000 smallest companies.
The NASDAQ is an index as well as a trading exchange, where people go, buy, and sell stocks.
Index only shows the up and down in the stock prices and the quantity, whereas in a trading exchange, people go physically, and they buy and sell a stock.
The New York Stock exchange has remained one of the largest stock exchanges in the world, but NASDAQ is also a large stock exchange considered after the New York Stock exchange.
Nasdaq is the stock exchange that buys and sells the technology companies of the world, such as Apple, Oracle, and Microsoft. All these and other largest tech companies are listed at NASDAQ.
The Nasdaq Composite has grown popular because it’s commonly accepted as a shorthand indicator of how tech-sector and innovative companies, big and small, are faring.
The Wilshire 5000 index includes all the stocks from the U.S. stock market. It is also known as the total stock market index because it includes all the public trading companies in the USA, not like Dow Jones and S&P. Wilshire 5000 contains all sizes and all types of companies. It is not specific to the company category or its size.
Wilshire is also known as UN caped index because it is not following any capitalization process, not putting any cap on the types and the sizes of the companies.
Indexed plays an essential role in analyzing the market condition. Indexes not only provide the trends and the prices of stock, but along with these index shows, the trends of investment diversification, risk appetite, and in short indexes help the decision-makers to invest wisely.