What the Heck is a Stock Index?

By James | April 20, 2009

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When you watch the news on TV or listen to news-radio you no doubt have heard stock market updates. These updates sound something like “The S&P 500 was down 5 points today to close at 985″ or “The Dow Jones Industrial Average closed up 30 points today to close at 8,678″. The S&P 500 and the Dow Jones Industrial Average are the most commonly quoted stock market indexes.

Each of these indexes are calculated in different ways. The weighting of each stock varies from index kamagra generic to index. For example, the Dow Jones Industrial Average, which includes 30 large companies, is online amoxil target=”_blank”>price-weighted. Price-weighted means that the larger the price of the stock, the more weight it has in the calculation of the index average.

Other indexes buy order pills online 5mg propecia online such as the Hang Seng Index, which measures the stock market in Hong Kong, are cytotec can you buy clomid over the counter induce miscarriage target=”_blank”>market-value weighted based on the size of a company rather than its price.

The number of stocks in an index varies widely from the Dow, which includes just 30 stocks, to the Russell Cheap Brand buy cialis tablets Levitra Global Index which includes approximately 10,000 stocks in 70 different countries.

An index can be broad-based like the S&P 500 which includes stocks in many sectors of the market or narrow-based like the KBW Bank Index which, as its name suggests, includes only bank stocks.

Stock market indexes can also be used as a basis for investing. I will cover that in a later post. For now, just know that an index is an easy way to convey the recent performance of the stock market in general or a specific sector of the market.

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