Investing Advice

What is a stock market index?

In the stock market world, you need a way to compare the movement of the market, up and down, from day to day, and from year to year. An index is just a benchmark or yardstick expressed as a number that makes it possible to do this comparison.

The S&P 500 and the NASDAQ (which we'll look at in a moment), each began at an arbitrary 100. The Dow hit 100 in 1906. The Dow index used a simple averaging method, while other indexes take the total market value of the stocks that the index represents, and then adjusts the index up or down for the net change in market value.

If this doesn't make sense to you, think of an index as just a number that lets you see if a group of stocks is up or down, and by how much.

Other Stock Market Basics Topics:

  1. What is a stock market index?
  2. Dow Jones Industrial Average
  3. S&P 500 (Standard and Poor’s, a McGraw-Hill Company)
  4. Other S and P Indexes
  5. The NASDAQ
  6. Wilshire Indexes
  7. Barra Indexes
  8. Russell (Frank) Indexes, Covering the Nasdaq stocks
  9. EAFE Index

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