Equity Exchanges and the Indexes That Follow Them

[DeletedUser394]

[FONT=&quot]In this post I will only be discussing major equity markets and indexes within the [/FONT][FONT=&quot]United States of America[/FONT][FONT=&quot]. The reason you tend to hear mostly about the economy of the [/FONT][FONT=&quot]USA[/FONT][FONT=&quot] is because they are such a dominant superpower on the world stage, both economically and militarily. The truth is that most developed and developing countries have stock markets, and a lot of people make a lot more money investing internationally than investing at home. The most well known stock exchanges in [/FONT][FONT=&quot]United States[/FONT][FONT=&quot] are as follows;[/FONT]

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[FONT=&quot]-NYSE ([/FONT][FONT=&quot]New York[/FONT][FONT=&quot] Stock Exchange);[/FONT]

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[FONT=&quot]Founded in 1792, the NYSE is the most prestigious and well recognized exchange in the world. The New York Stock Exchange is where a lot of the big American companies are traded such as McDonald’s, General Electric, Coca-Cola, and Wal-mart.[/FONT]

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[FONT=&quot]-NASDAQ (National Association of Securities Dealers Automated Quotation System);[/FONT]

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[FONT=&quot]Created in 1971, the NASDAQ is an exchange that is completely wireless. This means that there are no people yelling, screaming, and waving frantically, such as what you would see if you went to the trading floor of the NYSE. A large portion of stocks traded on the NASDAQ are internet and technology related. This is why the NASDAQ lost so much of its value during the dot-com bust.[/FONT]

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[FONT=&quot]-AMEX (American Stock Exchange);[/FONT]

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[FONT=&quot]The American Stock Exchange was actually purchased by the parent company of NASDAQ. Smaller companies are now traded on the AMEX.[/FONT]

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[FONT=&quot]There is a difference between a stock market, and a stock index.[/FONT]

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[FONT=&quot]A stock index is simply a grouping of stocks that share something in common. For example one stock index could contain stocks of companies that are only in one sector (Mining, Forestry, Oil, or Technology). A stock index can also be determined by the size of companies, also called an asset class or market capitalization. In other words, a stock index might be made up of only small, medium, large, or blue chip companies. The most popular stock indexes are those that are invested in each company listed on different exchanges like the NASDAQ or the NYSE.[/FONT]

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[FONT=&quot]Dow Jones Industrial Average (DIJA)[/FONT]

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[FONT=&quot]If you’ve ever watched a financial news network such as CNBC, BNN or even a regular news program odds are you’ve hear of the Dow Jones Industrial Average, more commonly known as “the Dow”. Many people confuse the Dow of being a stock market. It is an index. Founded on [/FONT][FONT=&quot]May 26th, 1896[/FONT][FONT=&quot] by Charles Dow, it started out as representing only 12 stocks, most of which were railroad companies. Managed by the editors of the Wall Street Journal, it now contains more than 30 different stocks. The DJIA does not hold any companies in the transportation and utility sectors. Seeing as there are thousands of publicly traded companies, the 30 companies monitored by the Dow do not give a reasonable picture of how the overall stock market is doing. The S&P 500 is not only a better indicator of the overall market, but can also be a lot more profitable over time.[/FONT]

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[FONT=&quot]The Standard & Poor’s 500 Index[/FONT]

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[FONT=&quot]If you didn’t already guess, the S&P 500 monitors 500 companies. The DJIA tracks some of the biggest blue-chip companies in the [/FONT][FONT=&quot]U.S.[/FONT][FONT=&quot] The S&P 500 on the other hand, chooses its portfolio based on the 500 most widely held companies, regardless of size. The S&P 500 used to include international companies, but will only cover those that are American in the future. There are many index funds, (Index Funds track the exact performance of the Index they are covering) that follow the S&P 500, such as the Vanguard 500 Index (VFINX). Few people realize that there are also the S&P 400, which tracks 400 mid-cap stocks, and the S&P 600, which tracks 600 small-cap stocks.
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[FONT=&quot]For more information on the S&P 400,500 and 600 I strongly suggest that you visit their website at www.standardandpoors.com[/FONT]

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[FONT=&quot]The NASDAQ Composite Index[/FONT]

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[FONT=&quot]This index covers every stock traded on the NASDAQ stock exchange. There are over 4000 companies currently listed on the NASDAQ. The majority of companies followed by the Nasdaq Composite are technology and internet related stocks. They do track financial, consumer/retail, and industrial companies, but these are in the minority. Because of the lack of diversification it makes the Nasdaq Composite Index a lot more volatile.[/FONT]

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[FONT=&quot]The Russell 2000 Index[/FONT]

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[FONT=&quot]There are 2000 small cap companies monitored by the Russell 2000. Stocks under 1$ and pink sheets (penny stocks), are not included. Since The Russell 2000 covers only small caps this gives it a very small market capitalization. For simplicity’s sake, lets round its market cap at $600 million. Taking any one company from the Dow, that company’s market cap will be hundreds of times greater than the entire Russell 2000. There are more than 20 different Russell Indexes, including the Russell 3000, which holds the 3000 biggest [/FONT][FONT=&quot]U.S.[/FONT][FONT=&quot] companies, and the Russell 1000, which contains the 1000 biggest companies within the Russell 3000.[/FONT]

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[FONT=&quot]The Wilshire 5000 Total Market Index[/FONT]

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[FONT=&quot]This is one of the biggest market indexes around. It contains almost 7000 stocks that are traded on the major [/FONT][FONT=&quot]US[/FONT][FONT=&quot] exchanges. The Wilshire 5000 contains every single stock listed on the NYSE (New York Stock Exchange), and almost all of the stocks listed on the NASDAQ and the AMEX respectively. It’d be impossible to invest your own money into each of the 7000 stocks covered by the Wilshire 5000, so buying into an index fund that matches the Wilshire Index is a good idea. Any index fund that follows the Wilshire will be very expensive. There is also a Wilshire 4500 Index, which is simply the same as the Wilshire 5000, except that the 500 stocks listed on the S&P 500 are removed.[/FONT]

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[FONT=&quot]Visit Wilshire Associates for more information.[/FONT]







I believe my post is accurate but everyone is prone to mistakes



Peace :coolgleamA:
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