What are Stock Market Index?

Do you want to know about a stock market index? A stock index is a composition of stocks of multiple companies which investors can also buy as an index fund through a brokerage account or from index-fund providers.

In finance, the stock market index or stock index is an index to evaluate the stock market or a subset of the market to provide insights to the investor on how a market is performing by comparing actual price levels with the past price levels. It is determined by the selective weighted stock price.

Dow Jones Industrial Average, NASDAQ Composite Index, S&P 500 Index, Nifty 50, BSE SENSEX are few examples of the major stock market index.

What are the Principal Standards of Stock Market Index?

Two of the principal standards of a stock market index are transparency and investability. The methods behind its construction are clearly defined. The stock market is investable because investors can invest in it by buying index funds that are organized in the form of an exchange-traded fund or mutual funds and “track“. Any difference between Index Fund performance or Index is known as tracking error.

What are the Types of Index?

Index or Indices can be categorized in many ways. For instance, S&P Global 1000 is an example of the ” Global” or “World” market index which has stocks from multiple regions.

Similarly, there are nation indexes that have stocks from that nation and they represent the performance of the stock market of that given nation only. The most commonly repeated national index is a mixture of the stocks of large companies listed in national stock exchanges.

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