| When you hear a news anchor on TV talking about | | | | The S&P 500 measures the stock of 500 of the |
| stock market new developments, they usually include | | | | largest public companies. They are categorized as the |
| terms such as the Dow Jones, or the NASDAQ, or | | | | largest according to their market value. The S&P |
| the FTSE in their report. What do these phrases and | | | | 500 is actually considered a pretty solid indicator of |
| abbreviations mean? | | | | overall stock market performance since they cover |
| These terms refer to stock markets or stock | | | | companies from a broad base of sectors. |
| exchanges where a company is listed. A company | | | | Indexes form the basis of the stock market. New |
| must be listed on a stock exchange for its shares to | | | | investors are often advised to invest in these |
| be traded publicly. After a company's shares are | | | | "blue-chip" stocks that are traded on either of the |
| released to the public in an Initial Public Offering (IPO), | | | | above three stock exchanges because they offer |
| they are then available for the general public to be | | | | great stability and the chance of a regular dividend |
| traded at the stock market. New York Stock | | | | income over time. |
| Exchange is probably the biggest stock market in the | | | | Some of the most popular international stock market |
| US, while the FTSE holds that honor for Europe. | | | | indexes include the FTSE (Britain), the Nikkei (Japan), |
| When people ask: "how is the stock market doing? | | | | the Hang Sang (Honk Kong), the DAX (German) and |
| What are the latest developments?" they mean to | | | | the CAC (France). |
| ask how the stock market index is performing. Stock | | | | Because stock market indexes give a great snapshot |
| market indexes are the key indicators to the | | | | of the stock market, they are used as indicators to |
| performance of any stock market. | | | | gauge stock market performance. Beginner investors |
| A stock market index, at its simplest, is the | | | | that not only invest in individual stock, they can also |
| cumulative stock prices of the companies trading | | | | invest in mutual funds, which are representative |
| divided by the number of stocks traded to achieve | | | | stocks of a certain stock market index. Mutual funds |
| an average indicator of stock market performance. | | | | are marginally safer investments because they group |
| Examples of popular US stock markets indexes are | | | | together stocks that perform roughly the same way, |
| the Dow Jones Industrial Average, the NASDAQ | | | | and are professionally managed. |
| composite and the S&P 500. | | | | You now have a better understanding of the stock |
| The Dow Jones lists the stocks of 30 companies, | | | | market, new insight into the workings of stock |
| ranging from food giant McDonalds to bankers like | | | | market indexes and an informed take on issues |
| Citigroup to entertainment firms like Disney. | | | | facing beginner investors. This knowledge will help |
| The Nasdaq composite tracks 5000 companies from | | | | you make sense of the financial terminology heard |
| different sectors, but its mainly focused on the | | | | everyday on TV and read in newspapers so you too |
| technology stocks. | | | | can become a savvy investor. |