Market Indices
What is an index?
Remember: A stock market index is simply a
basket of stocks that are followed by investors.
There are four main indices reported in the
media:
• The S&P/TSX Composite Index
• The Dow Jones Industrial Average
• The S&P 500 Index
• The NASDAQ Composite Index
What does each one tell us?
The S&P TSX Composite
• S&P stands for Standard’s & Poors. This is a
major American financial company.
• The S&P TSX composite index is a listing of the
largest equities traded on the TSX (decided by
market capitalization)
• These stocks represent all different types of
sectors.
The Dow Jones Industrial Average
As we saw at the beginning of this course, the
DJIA is a listing of 30 large American companies
that are traded on the New York Stock Exchange
or the NASDAQ.
This index allows us to see what trends are
occurring in the American equity markets.
S&P 500 Index
• This index follows 500 large-cap American
corporations. This index is weighted so there
is more influence by larger-cap companies.
• Companies are added or deleted depending
on analysis from Standard’s and Poor’s.
NASDAQ Composite Index
• The NASDAQ stock exchange, located in New
York, lists primarily technology and growth
companies.
• It stands for “National Association of
Securities Dealers Automated Quotations”
• The NASDAQ composite index follows many
Hi-tech companies and growth corporations
and is seen as an indicator of these sectors.
Questions
1. What is a market index and what does it do?
2. Why would an investor care if “the TSX
composite index dropped 2% today”?
3. Draw a rough sketch of what has been
happening to the S&P TSX composite index
over the last year.
4. Compare your portfolio’s performance
compared to the TSX composite index.