|
 |
Have you ever heard someone say "The Market
is up today"? Well, if you have and didn't know what they were talking about,
they were referring to stock indexes.
What is a Stock Index?
Like a mutual fund, a stock index is a collection of stocks. This index tells
investors how the stocks in the index are doing as a group.
Stock indexes are given a value, or basically a number such as 2500. When this value
goes up, it means the stocks in the index are generally moving up. When the value
drops, then the stocks are generally going down.
Why Do People Use Stock Indexes?
Stock indexes are great because they let you see how the market is doing as a group. If
you were to get out a newspaper or log onto the internet, you would have to look at
hundreds and thousands of stocks just to see how the overall market is doing. By
looking at a stock index, you can get an idea of how stocks did overall without having to
look at all of the stocks.
How Many Stock Indexes Are There?
There are countless indexes but, as a young investor, there are really only three that you
really need to know about.
The Dow, commonly referred to as "the Market", is a stock index made up of 30
different stocks. This index has been around for over a hundred years. The NASDAQ is
another stock index that tracks stocks that are in the NASDAQ stock exchange. The
S&P 500 is probably the most important stock index. It is made up of 500
large, well-known companies like Microsoft.
Next: Stock Basics
Chris
publishes a monthly newsletter called Young Investor Monthly that helps teach and
encourage young adults to start investing. Visit the site at www.youngmonthly.com
and sign up for a free copy. |
