The Dow. The S&P 500. NASDAQ. FTSE. MSCI. They're all market indices.
Why do we even have these things? Well, we want to know, quantitatively, how well or poorly the market is doing. The indices get tracked and managed a bit. Like...if you're the index manager of the S&P 500, what do you do when AAPL buys one of the companies inside of that index? You have to replace that bought company with an equivalent value of an equivalent company, right? Well, how do you figure out where to look or what to put in its place?
Eh, you guess. You poke around. You look at trading volatility and industry sector and globalness, and think about the future in one form or another.
See: Index Funds. See: Exchange-Traded Funds.
Related or Semi-related Video
Finance: What is the S&P 500?45 Views
finance a la shmoop. what is the S&P 500? well the S&P 500 is just an index- that
is the standard and poors company assembled 500 stocks put them on a
spreadsheet- this was a spreadsheet in 1957 -and they tracked them. [spreadsheet pictured]
well the index had something like 37 shares of Procter & Gamble, the 23 shares
of Ford, 18 shares of IBM and so on. in the 1950s the S&P 500 totaled something
like 40 maybe 50 bucks on a good day. at the end of each day the elves who worked
inside of the S&P Factory, they would add up the shares basically ignore any
dividends and send to the press a total which was published to more or less
everyone who cared about investing. well not nearly even a century later the 40 [man reads newspaper]
to $50 reign to the SNP is today knock on the door of 2,500 .so without even
having dividends reinvested you'd have made 50 times your money with dividends
reinvested to buy more shares instead of keeping the cash to buy you know
groceries or electric massage slippers. you'd have made over 70 times your [grocery display case and slippers pictured]
original investment. welcome to America.
Up Next
What is a Country Basket (Index Fund)? Investing internationally can be a challenge, as foreign exchange, different accounting rules, time zones an...
What is the difference between mutual funds and index funds? Mutual funds are professionally managed. Those investors trade shares and realize taxa...
How do you judge the performance of an index fund? For index funds, they're really just a reflection of the stocks and bonds they, uh... reflect. S...