DAX S&P SENSEX NASDAQ

Just a bunch of meaningless letters?

You could be mistaken for thinking they are just that - meaningless letters. In fact, they're actually some of the stock market indices you're likely to be invested in!

Have you ever wondered what markets to follow and what they actually contain? 

Stock Market IndexesYou probably know about the FTSE, Dow Jones Industrial Average and S&P 500. You might also know of the Nikkei 225 and Shanghai Shenzen CSI 300 Index that have come to the fore in recent years.

Ones you might not know about though are the KASE and the CSE - the Kazakhstan and Cyprus indices respectively. Nor the emerging market indices such as Brazil’s BOVESPA and India’s BSE SENSEX. 

So which are the important indices and what are they composed of?  Why not have a go at answering the question for each index too?

Dow Jones Industrial Average (DJIA)
  • Has 30 components, all massive household names such as Exxon, Microsoft and Coca-Cola
  • Named after Charles Dow (Editor) and Edward Jones (Statistician)
  • Second oldest index in America and one of the most followed in the world
  • Highest point: 14,164 in October 2007

Question 1: What company has been on the DJIA since inception?

Standard & Poor 500
  • Composed of 500 selected stocks to represent the American economy
  • One of the most important indices in the world
  • Highest point: 1,565 in October 2007

Question 2: How many seconds elapse before the index is updated?

Nikkei 225
  • Composed of the 225 largest Japanese companies from all sectors
  • Calculated daily by the Nihon Keizai Shimbun newspaper (hence the name NiKei)
  • Highest point: 38,915 in December 1989
  • The index grew 600% in the 1980s only to lose 81% in the following decade

Question 3: In what year did the Nikkei start?

FTSE 100
  • Most commonly used index in the UK and makes up 81% market share
  • GKN and Tate & Lyle have been the longest constituents on the index
  • Index began on the 3 March 1984 at 1,000 points
  • Highest point: 6,950 in December 1999

Question 4: What is currently the largest listed company on the FTSE?

That lists the four most important indices that people follow. 

The next three are ones to follow in the future. You also need to read on for the answers to the questions above.

BSE SENSEX
  • Constitutes 42% of all listed Indian companies and currently has 30 companies on the index
  • SENSEX is made up of SENSitive and indEX
  • Hit 1,000 points in 1990, hit 20,978 in January 2008
  • In 2006 it lost 1,100 points in a single day and lost $131 billion in 7 straight days of losses in 2006
CSI 300
  • The top 300 companies by market capitalisation on the Shanghai or Shenzen exchange
  • The top 10 companies make up 27% of the index
  • Started at 1000 points in April 2004
  • Highest point: 5,892 in October 2007
Brazil BOVESPA
  • Full name is the Bolsa de Valores, Mercadorias & Futuros da Sao Paulo
  • Is now 8th largest stock exchange in the world with 381 companies on it
  • Highest point: 73,516 in 2008

Monitoring the Stock Market to Stay InformedThe enormous growth of the above three indices certainly shows the potential for each market.  They have, however, also had massive drops and are still not close to the highs they have previously achieved. 

Watching indices can keep you informed of what’s going on in the various markets around the world, as well as give you a good indication of the state of the global economy as a whole. 

 

 

Article by Ranjit Virk
Independent Financial Adviser
Legal & Medical Investments
March 2012

 

Answers:

  1. General Electric
  2. 15 seconds
  3. 1950
  4. BHP Billiton (Market capitalisation £148 billion) 

Source: Wikipedia

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