Stock Indexes

Have you ever heard someone say "the market is up today"? Well, if you have and didn't know what they were talking about, they were referring to stock indexes.

What is a Stock Index?

Like a mutual fund, a stock index is a collection of stocks. This index tells investors how the stocks in the index are doing as a group.

Stock indexes are given a value, or basically a number such as 2500. When this value goes up, it means the stocks in the index are generally moving up. When the value drops, then the stocks are generally going down.

Why Do People Use Stock Indexes?

Stock indexes are great because they let you see how the market is doing as a group. If you were to get out a newspaper or log onto the internet, you would have to look at hundreds and thousands of stocks just to see how the overall market is doing. By looking at a stock index, you can get an idea of how stocks did overall without having to look at all of the stocks.

How Many Stock Indexes Are There?

There are countless indexes but, as a young investor, there are really only three that you really need to know about.

The Dow, commonly referred to as "the Market", is a stock index made up of 30 different stocks. This index has been around for over a hundred years. Since then, the index has risen from 50 up to 10000, where it stands today.

The NASDAQ is another stock index that tracks stocks that are in the NASDAQ stock exchange. It is currently at around 1200.

The S&P 500 is probably the most important stock index. It is made up of 500 large, well-known companies like Microsoft. The stock index is currently at about 1100.

Now that you know a little about stock indices, you can continue on and learn about our very own index, the Young30!