What is the market?

by Michelle Smalenberger, CFP® / August 25, 2017


Whether it is on the nightly news, in the newspaper, on various financial radio stations or websites, you hear people talk about the market.

Yet, what is the market?

The market is simply where stocks, bonds and funds are traded.  Here we refer to a handful of common indexes or benchmarks used to judge general performance on any given day.

It is interesting that the Dow Jones Industrial Average, the index with the smallest number of stocks, is typically the one watched and discussed as to how the market in general is doing.  It could be argued that each index is important because they each gauge a different type or size of company.

The following is a brief description of the major indexes and how they are made up:

The S&P 500 Index is a grouping that includes 500 stocks that are chosen by a team of analysts and economists at Standard & Poor’s.  They consider factors like market size, liquidity, and industry.  This index is commonly seen as a reflection of the performance of the U.S. large-cap stock universe.

Examples of stocks in this index are: Apple, Exxon Mobil, General Electric, Microsoft, IBM, Chevron, Pfizer, Johnson & Johnson and Procter & Gamble.

For a complete list of the 500 companies currently click here

The Dow Jones Industrial Average is an index that includes 30 significant stocks.  When you hear that the market is up or down, this is the index often referred to as “The Dow.”  It is price-weighted meaning that stocks with a higher share price influence the index than those with a lower price.

Examples of stocks in this index are: 3M, American Express, Apple, Boeing, Caterpillar, Cisco Systems, Coca-Cola, Disney, Exxon Mobil and General Electric.

For a complete list of the 30 companies as of January 2017 click here.

The Nasdaq is an index that includes 3,000 plus companies.  Most of the companies are technology and internet related but there are some consumer, financial, biotech, and industrial companies, too.  It tends to be a more volatile index since it includes many names that are more speculative or risky.

Examples of stocks in this index are: Apple, Microsoft, Oracle, Google, Intel, Qualcomm, Amazon, Cisco and Amgen.

Here is a larger list of companies in this index.

The Russell 2000 is an index that measures the performance of approximately 2,000 small-cap companies in the U.S.  Small-cap stocks are companies that, although may be large, are not necessarily household names that you would recognized if heard.

Examples of stocks you may know in this index are: 1-800 Flowers.com, Alico, Allete, Almost Family, Kirklands, La Z Boy, Knight Transportation, Ruby Tuesday and Rosetta Stone.

Here is larger list of the companies that make up this index.

We hope this highlights some common references in the news and helps you feel more aware of how these indexes relate to your portfolio.

If we can help you understand how you are invested, please let us know.  We are always happy to help you learn and be more engaged in your financial life!

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