Investing 101: What are stock market indices?

Julie Brownlee, Fsp Invest, 01 Apr. 2014

Tags: stock market indices, what are stock market indices, stock market, stock market indexes, indices, index, johannesburg stock exchange, jse indices,

If you ever see the financial news on the TV, you’ve probably heard the news reader telling you how certain stock market indices performed that day. They either moved up or they moved down. But what is a stock market index? And what does it tell you? Let’s take a closer look…

Stock market indices measure performance

Stock market indices are basically a measurement of performance, Gareth Stokes in Fear, Greed and the Stock Market explains. Without having indices (or indexes) to look at, you’d have to look at every share on the stock market to work out how the market performed.

Charles H Dow and Edward Jones formed the first stock market index back in the early 1900s, the Dow Jones Averages. Investors still use this index today!

Get a 72 hour head-start on everyone else…

Let TV show pundits, blogs, and newspapers try to explain why stocks go up. Frankly, I really don't care.

All you and I need to know is which stocks are going up… BEFORE they make their move.

If you knew that investors were about to pour millions of rands into a certain stock, then you could invest before they did… and make a lot of money by riding that stock all the way up!

In January 2014, when the JSE All Share Index was sitting at 51.23%, our portfolio was up 97.78%.

Don’t miss out on our winning share-selection formula. Click here to find our more…

Both Dow and Jones realised that investors and the public needed a way of easily seeing how the stock market had performed on a particular day.

A number of different shares make up stock market indices. These shares have a weighting according to their size.

The Johannesburg Stock Exchange’s indices

There are several different indices that cover the performance of the Johannesburg Stock Exchange. Let’s take a look at some of the most popular and see what they measure…

The JSE All Share Index:
This is basically all the shares on the Johannesburg Stock Exchange.

The Top 40 Index:
This is the performance of the largest 40 companies. The performance of this index is usually very similar to that of the All Share due to the weighting principle. In other words, these shares account for a large weighting of the All Share.

The Platinum Index:
This is all the platinum producers on the exchange.

The Industrials Index:
This is all the industrial shares on the exchange.

If you have a look at the financial pages of a newspaper, you’ll see the wide array of indices available. You can see at a glance how they performed the previous day.

So there you have it, what stock market indices are.

Related QA

akossuth asked:
I am a new investor and about to embark on putting together my portfolio. I have an account with Easy Equities. Regarding your portfolio in your [read more]
Published at 13 Feb. 2018 in: Stock Market Share portfolio 1 Answer
oliviees asked:
Dear Gavin / Timon Regarding your cfd tip sent on 24 February 2017 for APN (Apsen), titled ‘Our broker’s top trade of the week’. I am [read more]
Published at 06 Apr. 2017 in: Stock Market Cfd 1 Answer
hjb777 asked:
Good afternoon, Please can you advise your recommendations (buy, sell and hold) on the following shares for 2017 (short [read more]
Published at 21 Feb. 2017 in: Stock Market Shares 2017 Short term 1 Answer
jacquesprinsloo77 asked:
Hi where can i get a detail table list on daily basis / live of all shares on jse + current volume traded + current /delaid price of share.? [read more]
Published at 08 Nov. 2016 in: Stock Market Helpdesk 2 answers
npadiachi70 asked:
my question for today is what advise can you give on trading binary options? is good or bad too rsiky or same as currency trading [read more]
Published at 12 Oct. 2016 in: Stock Market Online marketing 1 Answer

Related articles: