What are you watching?: The World’s Major Stock Indexes Explained

With the ever growing trend of investing in Foreign Markets and Emerging Markets it is important for investors to understand the different Stock Indexes around the world.  A  Stock Index is a measure of the changes in an economy or securities market.  A Stock market represents the daily change in a securities market or economy sector on a point’s basis.  It is also expressed as a percentage of change.

Investors can not directly invest in a Stock Index because it is not an investment vehicle; it is a measure of our market and economy performance.  However, we can purchase Index Mutual Funds which offer a passive investment style that follows a particular index.  The Management Expense Fees for Index Mutual Funds are lower than regular actively managed Mutual Funds because Index Mutual Funds do not require a professional Fund Manager to make investment decisions.

The difference between a Stock Market Index and a Stock Exchange, such as the New York Stock Exchange (NYSE) or the Toronto Stock Exchange (TSX), is that a Stock Exchange is the entity which allows stocks to be offered, traded, tracked and sold.  A Stock Market Index is made up of a certain number of Stocks; a Stock Market Index is a good indicator of how an economy as a whole is performing.  Stocks could not be featured in a Stock Index if they were not listed on a Stock Exchange.

S&P 500 is one of the most recognized Stock Market Indexes around the world and a leading indicator of US equities.  It is an American based Stock Market and Stocks listed on the S&P 500 are represented in US Dollars.  There are 500 stocks listed on the Standard and Poors 500 Index which represent large cap securities.

The Dow Jones Industrial Average is another very common US Stock Index.  The DJIA used to be the leading US Stock Market Index; however it is only comprised of 30 stocks that trade on both the New York Stock Exchange as well as the NASDAQ.  Only 30 stocks is not a great representation of the US Economy as a whole.  The Dow Jones was created in 1896.

Nikkei is the major Stock Index in Japan and it has been calculated since 1950.  The Nikkei is made up of 225 of Japans leading blue chip stocks that trade on the Tokyo Stock Exchange.  Nikkei is the Japanese Stock Market Index equivalent of the S&P 500 in the US.

Hang Seng is the most commonly known Stock Market Index in Hong Kong.  The Hang Seng is comprised of 40 of the largest companies that trade on the Hong Kong Stock Exchange, and it has been published since 1969.  The stocks of the Hang Seng are divided into four categories which include commerce and industry, finance, utilities, and properties.

FTSE is a Stock Market index based in London England.  It is the British equivalent to the S&P 500 in the United States.  FTSE is comprised of 100 blue chip stocks that trade on the London Stock Exchange.

We can watch these Stock Market Indexes on various financial websites such as Yahoo Finance and MSN Money.

Photo by YoTut

Kristina Tahnyak

Tahnya is a Certified Financial Planner and former Investment Advisor turned marketing and communications professional She holds a degree from Concordia University, is debt free and currently works in the field of digital marketing.