Investors Ed - Stock Indexes

In this edition, we’ll take a look at the U.S. stock market indexes.

The most broadly followed indexes in the United States are the S&P 500, the Dow Jones Industrial Average, and the Nasdaq Composite. As you know, the media and investment community follows these three indexes regularly throughout the day. Investment managers use these indexes as benchmarks for performance reporting.

Let’s explore each of the 3 indexes.

I’ll start with the Standard & Poor’s 500 Index. Commonly known as the S&P 500, it’s an index which includes the top 500 U.S. companies primarily based on their market capitalization. Market Capitalization or market cap is calculated by multiplying the total number of a company’s outstanding shares by the current market price of one share. The S&P 500 index comprises approximately 80% of the total U.S. stock market value. We sometimes refer to it as the broader index.

The Dow Jones Industrial Average or simply just the Dow, is one of the oldest and most frequently used indexes. It is comprised of the stocks of 30 of the largest and most influential companies in the U.S.. American Express, Proctor & Gamble, Apple, and Walmart are a few of the companies included in the index.

This is not a solicitation for these or any of the companies included in the index. The Dow represents about a quarter of the value of the entire U.S. stock market and is known for it’s listing of the markets blue-chip companies with regularly consistent dividend payouts.

The Nasdaq Composite Index or Nasdaq is an index which is known for its heavy inclusion of technology stocks including software, biotech, semiconductors, and the like. The index also includes big and small companies from sectors other than technology such as financials, industrials, and insurance, among others.

Although very brief, I hope I’ve familiarized you with the top three U.S. stock indexes. There are many more that I didn’t mention but this is a good start. If you have any questions regarding the material I just covered or care to have a confidential discussion of your financial portfolio, please give me a call.

Well, that’s it for this edition of Investors Ed. This is Frank Calderone from Raymond James in Armonk, New York. 

Remember – Knowledge is Empowering !!