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Stock Market Indices meaning

A stock index is used to gauge the performance of the overall stock market or a certain portion of the stock market

Rather than looking at a single stock, investors can look at indices which are a collection of many.

Three very common US indices are the Dow Jones stock Index, the S&P 500 stock index, and the Nasdaq stock index.

What is the Dow Jones Industrial Average?

The Dow Jones Industrial Average, commonly referred to as “the Dow”, is one of the most well known and most used indices in the world. This index includes stocks of the 30 largest and most powerful companies in the United States.

What is the S&P 500?

The S&P 500, otherwise known as the “standard and Poor’s 500”, is much broader and well diversified. This index is made up of 500 of the most commonly traded stocks in the United States. Additionally this index can represent as much as 80% of the value of US markets.

What is the Nasdaq index?

The Nasdaq Composite is known to contain a large number of technology stocks, however this index also includes, insurance, finance, industrial and many other types of stocks. One key difference in this index and the two mentioned before is that the Nasdaq Composite includes many smaller companies that are considered to be more speculative investments.

It is widely thought that by keeping track of these indices, investors and traders of the Stock Market can maintain a good grasp of the public's opinion of companies that vary in size and industry.