Stock markets 101: The ins and outs of indexes

Julie Brownlee, Fsp Invest, 06 Nov. 2015

Tags: indexes, what are indexes, how indexes work, index, stock market index, indices

The Johannesburg Stock Exchange is home to around 400 companies. These companies are of different sizes and operate in a range of industries and sectors.

If you want to see how the stock market is performing, looking at the daily performance of 400 companies would be pretty laborious. Instead of having to do this, you can look at the different indexes on the JSE.

So what exactly are indexes? And how do they work?

Let’s take a closer look…

What are indexes?

Indexes (otherwise known as indices) are simply systems of measurement on the stock market.

There are a number of different indexes on the JSE, which measure value depending on each share’s weight of a basket of shares at a particular point in time.

Investors use indexes for different reasons. One of the most common reasons is to measure performance and to estimate what the market’s rate of return is.

Indexes in South Africa

There are a number of indexes, such as the JSE Top 40 Index and the JSE All Share Index.

Take the Top 40 Index. This contains the 40 largest companies on the JSE. The index weights each share according to its size. The stock exchange uses specific formulas to calculate this.

You can look at the broad performance of the stock market using indexes such as the Top 40 Index and the All Share Index. Or you can look at more specific sectors using indexes such as the Gold Mining Index and the Financial 15 Index.

If you watch the financial news of TV, you’ll notice that the performance of the stock market is given by its indexes. This also includes the performance of overseas markets such as the FTSE 100 Index, which is the 100 largest companies listed in the UK.

So there you have it. The ins and outs of indexes.

*********** Hot off the press ************

Make a personal commitment to start building your wealth right now …

From this moment, you have a choice. Stay where you are right now or make the conscious decision to change the way you perceive money.

I want you to forget the fact that you need more of it. I want you know that you can get more of it. Finally, I want you to make a personal commitment to start building your wealth right now.

And I want to help you do it. That’s why I started Fast-track Millionaire in the first place.

Every month I send you the latest news and information on the freshest business ideas, personal finance recommendations and proven strategies to build your wealth.

Click here and gain access to a wealth of information…


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: