1. Index Investing: Introduction
  2. Index Investing: What Is An Index?
  3. Index Investing: The Dow Jones Industrial Average
  4. Index Investing: The Standard & Poor's 500 Index
  5. Index Investing: The Nasdaq Composite Index
  6. Index Investing: The Wilshire 5000 Total Market Index
  7. Index Investing: The Russell 2000 Index
  8. Index Investing: Other Indexes
  9. Index Investing: Index Funds
  10. Index Investing: Conclusion

We hope this tutorial has given you insight into how you can track the market, use it as a benchmark and make investments.

Some points to remember:

  • An index is a statistical measure of the changes in a portfolio of stocks representing the overall market.
  • The first index was created by Charles Dow in May 1896. It has evolved into what we know today as the Dow Jones Industrial Average (DJIA).
  • The DJIA uses price-based weighting, but most of the other indexes use market capitalization based weighting.
  • The DJIA contains 30 of the largest companies in the U.S. It is what most people are referring to when they talk about "the market."
  • The S&P 500 includes 500 of the largest U.S. companies. More and more, it is seen as the benchmark of the U.S. stock market.
  • The Nasdaq Composite Index represents all the companies on the Nasdaq. It is heavy with tech companies and is more volatile than other market indexes.
  • The Wilshire 5000 Total Market Index contains more than 6,500 stocks and is the largest index in the U.S.
  • The Russell 2000 measures the performance of small caps that often get left out of the other big indexes.
  • There are literally thousands of other indexes, tracking various regions and industries.
  • Most mutual funds don't beat the market.
  • Index funds have lower expense ratios than other mutual funds and allow investors to get the market return.

 


Related Articles
  1. Investing

    S&P 500 Vs. Dow Jones ETF: Which is a Safer Investment? (SPY,DIA)

    Learn about why the risks of investing in the ETFs that track the S&P 500 and the Dow Jones Industrial Average are very similar for investors.
  2. Investing

    5 Things You Need To Know About Index Funds

    Index funds, at their best, offer a low-cost way for investors to track popular stock and bond market indexes. But not all index funds are created equally.
  3. Investing

    DIA vs. IWL: Comparing ETFs with the Largest U.S. Companies

    Find out how the SPDR Dow Jones Industrial Average ETF compares with the iShares Russell Top 200 as mega-cap exchange-traded funds.
  4. Investing

    How Stock Market Indexes Changed Investing

    Find out how the first market averages were calculated and what they mean for investors today.
  5. Investing

    3 Index Funds with the Lowest Expense Ratios

    Read detailed information about index mutual funds with some of the lowest expense ratios in their categories, and learn about their pros and cons.
  6. Investing

    The Lowdown On Index Funds

    If you can't beat the market, why not join it? Read on to go over your options.
  7. Financial Advisor

    The 4 Best U.S. Equity Index Mutual Funds

    Find out which four index mutual funds are among the best U.S. equities index mutual funds for core holdings in your investment portfolio.
  8. Investing

    Benchmark Your Returns With Indexes

    If your portfolio is always falling short, you may not be making an apples-to-apples comparison.
  9. Investing

    How the S&P 500 and Russell 2000 Indexes Differ

    The S&P 500 and Russell 2000 are used as benchmarks for broader segments of the U.S. stock market. Each index has its own approach to measuring stocks.
Frequently Asked Questions
  1. Is it possible for a country to have a comparative advantage in everything?

    Learn whether one country can have a comparative advantage in everything and what the difference between comparative advantage ...
  2. What's the difference between publicly- and privately-held companies?

    Privately-held companies are owned by the company's founders, management, or private investors. Public companies are owned ...
  3. What Are Short-Term Investment Options?

    If you only have a short period of time in which to invest your money, there are several short-term investment options you ...
  4. What are leading, lagging and coincident indicators?

    Leading indicators move ahead of the economic cycle, coincident indicators move with the economy, and lagging indicators ...
Trading Center