The Dow
This index is also known as “ Dow Jones Industrial Average” is among the first and well-known index across the globe. It comprises of about thirty stocks of the most successful and largest industries in America. Dow is weighted through a process called price-weighted index. Its initial computation was done by adding the price of each stock from every company in the index and doing a division its totals by the total number of companies. Over the years now it is not easy to compute. The Dow equates approximately a quarter of U.S. stock market in general. However, a percentage change of the Dow does not mean that the whole stock market of the U.S. has changed by the equal percentage.
The S&P 500
S&P 500 index is among the largest and very complex index as compared to the Dow. This index is made of five hundred well-known and adversely traded stock in the U.S. It equals approximately eighty percent of the total value of America’s stock markets. This analysis indicates that S&P 500 index offers a significant indication of investment conditions in the U.S. financial market. S&P 500 is weighted through process called market weighted also known as the called capital weighted. Each stock in the index stands for a section of its total market capitalization. Many investors consider this index because of the market-weighted method used to be a significant measure of the condition of the market. In this index, comparison of two different investments can be efficiently made when changes are analyzed in percentages than dollar values.
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Nasdaq Composite Index
This index is a technology dominated index. Investors have known Nasdaq Composite Index as an exchange of technology stocks market. NCI is weighted through process known as “ Market-capitalization-weighted index” of every shares that are listed on Nasdaq stock exchange. The movement of this index indicated the performance of technology dominated companies in the market.
In conclusion, it essential to be conversant as an investor with the information about the indices performance analysis. In a situation where am considering an investment option among the discussed indices, I will invest in S&P 500 because it gives the essential representation of the U.S. Market condition as a whole unlike another index on the International stock market.
References
Helmenstein, C., & Haefke, C. (2015). Stock Market Indices. Wiley Encyclopedia of Management , 1-2. doi:10.1002/9781118785317.weom040072
Schick, K. (2018, January 17). An Introduction to Stock Market Indices. Retrieved from https://www.investopedia.com/insights/introduction-to-stock-market-indices/
