Guide to Popular Stock Indices

You must have seen how stock markets are sensitive to various economic and political elements. Any government policy change or a significant announcement influencing any sector will impact the stock markets. Thus, the news channels and online platforms discuss the stock index denoting how the stock market performs that day.

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What is a Stock Index?

A stock index is a measure of performance or a report card of the stock market. A subset of stocks is collected to determine the stock index based on various weighting methods, such as based on market capitalization, stock prices, and more.

Some stock indices may be unweighted as well. The selection of a basket of stocks may be based on similar market capitalization, like in FTSE 100 or a sector in Nasdaq enlisting big technology brands. 

Why is Stock Index Important in the Financial World?

The stock index indicates the health of the stock market or a particular industry through which the constituent stocks are chosen. Therefore, the stock index is considered a benchmark guiding investment decisions in the financial landscape. 

Investors, stock brokers, financial planners, and advisers rely on the stock index to decide their investment strategies. You can get necessary details like the stock prices and trading volume through the stock index. Therefore, informed decisions for buying, selling, or holding stocks become easy. 

Globally Followed Stock Indices

The US is the largest economy, and the stock markets NYSE and Nasdaq combined account for a massive share of 54% in the global stock market. The indices of these stock markets and their other variables, like Nasdaq 100, are most commonly followed by investors globally.

Apart from these, 

• The Financial Times Stock Exchange (FTSE) index from the UK, 
• Deutscher Aktien Index (DAX) from Germany, 
• Dow Jones Industrial Average (DOW), 
• Standard & Poor’s 500 (S&P 500), 
• Nikkie 225 index from Japan, 
• Shanghai index from China, 
• Straits Times Index (STI) from Singapore 

These are other globally followed indices. 

If you are curious about stock indices and wish to learn more about them, I suggest you read the latest article in the TraderMade Blog on Popular Stock Indices.