The World's Stock Market Indices Explained
The World's Stock Market Indices Explained#
A stock index is a barometer measuring the performance of a group of shares. It lets you read the general direction of a market at a glance. When someone says "the Paris market gained 1%", what they actually mean is the performance of the CAC 40.
The Major Global Indices#
- S&P 500 (USA): the 500 largest American companies — THE global benchmark
- DJIA / Dow Jones (USA): 30 American blue chips — the oldest index (1896)
- NASDAQ 100 (USA): the 100 largest tech companies — an outperformer since 2010
- CAC 40 (France): the 40 largest French listed companies — LVMH, TotalEnergies and others
- DAX 40 (Germany): the 40 largest German companies — SAP, Siemens and others
- FTSE 100 (United Kingdom): the 100 largest British companies
- Nikkei 225 (Japan): 225 companies listed in Tokyo — Toyota, Sony and others
- MSCI World: 1,500+ stocks across 23 developed countries — the global index par excellence
How Are They Calculated?#
Market-cap weighted
Price weighted
10%/yr
Average S&P 500 return (historical)
500
Stocks in the S&P 500
1896
Dow Jones created
~80%
US share of the MSCI World
How to Invest in an Index#
You cannot buy an index directly. You use ETFs (trackers) that replicate its performance. The Vanguard S&P 500 UCITS ETF, for example, replicates the S&P 500 for just 0.07% in annual fees. It is the simplest and cheapest way to invest in the market.
Did You Know?
Warren Buffett bet $1 million that a simple S&P 500 ETF would beat the best hedge funds over ten years (2008-2017). He won: the S&P 500 returned 125% against 36% for the fund of hedge funds.
On TradeSynapse
Follow 27 global indices in real time on TradeSynapse. Compare their performance and simulate ETF investments to find the allocation that suits you.
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