Have you ever heard someone say "the Dow is up 500 points" and you had NO clue what they were talking about? SAME. Today, I give an overview of the 3 most followed and influential stock market indexes out there: the Dow Jones, the Nasdaq Composite and the S&P 500.
First of all… what even is a stock market index? An index tracks companies or industries that are traded on the stock market. Think about it, there are THOUSANDS of companies/securities that are traded on the stock market every single day and while it's helpful to know how the entire stock market is performing, there's also value in wanting to know how a subset of the market is performing, as well. Indexes help give a snapshot of the market's performance without needing to analyze the ENTIRE market.
The Dow (also known as the Dow Jones Industrial Average) is one of the most well-known stock market indexes. It tracks 30 of the largest companies that are traded on the stock market, which makes it the most simple of the stock market indexes, but that's also its biggest problem — many people think the performance of 30 HUGE and incredibly profitable companies isn't indicative of how the overall stock market may be performing.
The Nasdaq composite index tracks pretty much every company that gets traded on the Nasdaq stock exchange (we're talking about ~2500 companies!). Because the Nasdaq stock exchange tends to have a lot of technology companies and start-ups, that means the Nasdaq index has a lot of technology companies and start-ups.
The third index is the S&P 500 which tracks… you guessed it… 500 of the largest companies that are traded in the stock market. Because it looks at 500 companies, it's incredibly well-diversified, which is why investing icons like Warren Buffett usually recommend investors invest in index funds that track the S&P 500 index.
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**Please note I am not a financial advisor or CPA and the information in this video is for entertainment purposes only. Please consult a professional before making any changes to your finances.**
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Anyone else so excited to finally understand news reports that talk about the Dow?! This one was seriously a game changer for me 😂
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Who is the best s&p 500 or Nasdaq please assist for long term investment i am also index fund investors
Have an Amstel and convert to cash.