Dow Stocks List

A stock index looks at statistical averages for a certain part of the market or stock. Stocks are included in an index based on common features, for example, they can be traded on the well being of the same industry come from companies of a certain size, or represent a geographic location.

The best-known indexes in the United States are the Dow Jones Industrial Average, NYSE Composite Index and the S & P 500 Composite Stock Price Index, there are many others. The indices provide an overall look at the economic health of a particular industry or stock exchange.

The indexes are calculated in several ways. A "price-weighted index is based solely on stock prices. This type of index does not take into account the importance of any one stock index or the size of the company. In contrast, market value "weighted" index takes into account the size of enterprises. In this way, changes in prices of small firms have less effect than those of large companies in the index. Another third type of index, the "market share weighted 'index is based on the number of shares instead of their total value.

In addition to providing an overall assessment of the health of specific economies, the indexes may also be a useful tool for investors. For example, "passively managed mutual funds," a type of funds based on indexes, it has been shown to outperform managed funds on a consistent basis. If a mutual fund is based on an index, it includes all the holdings of the index is based on. In other words, if the NYSE rose a percentage point, the NYSE-based fund also increases one percent. This results in a reduction in search costs and transactions - savings that can be transmitted to the fund's investors.

The most famous index in the U.S. is probably the Dow Jones Industrial Average, which tracks activity in stocks of 30 of the largest companies in America, like General Electric, Coca Cola, IBM and General Motors. As an "average" price-weighted index, it assigns more weight to stocks more expensive. Some analysts believe however that this weighting of price does not fluctuate with the stock market accurately, and they also feel that a group of 30 companies is too low to allow a proper evaluation.

The S & P 500 Index is based on 500 carefully selected U.S. companies that represent a wide range of economic activity. Only the Dow Jones is more influential, and the S & P is considered an accurate indicator of the state of the economy of the United States.

The FTSE 100 index was the most influential outside the United States. Based on 100 of the largest companies listed on the London Stock Exchange, the index is one of the largest in Europe and is considered an indicator of the UK economy. The CAC 40 from France and the Nikkei 225 from Japan are the other major indices in other countries.

Those who wish to negotiate the movement of a particular index, have more options than ever. The introduction of the ETF or Exchange Traded Funds has enabled many traders and investors to participate in the evolution of an integer index without buying all the shares listed in the index. ETFs have now become very popular and very liquid. For example, the QQQQ, PowerShares QQQ Trust have more than 100 million shares traded on a daily basis.