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Conclusion and Resources
Now when someone asks, "How's the market doing today?" you'll know exactly how to answer! We hope this tutorial has given you insight into how you can track the market, use it as a benchmark, and invest in it.
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 DJIA.
- The DJIA uses price-based weighting, but most of the other indexes use market capitalization-based weighting.
- The Dow Jones Industrial Average (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 more volatile than other market indexes.
- The Wilshire 5000 Total Market Index contains over 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 a better opportunity to get the market return.
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