Equity Indexes

Obtain a list of all equity indexes and understand what stocks constitute each equity index The major and most familiar equity indexes like the Dow Jones and NASDAQ use a smaller and more established sample of companies, while the Wilshire and Russell equity indexes use a broader range of less established stocks to constitute these indexes. For example, the Dow Jones is 30 of the largest and most widely held stocks available but the Russell has either 1,000 or 2,000 much lighter-traded and smaller stocks from various industries.

I recommend:  Read the history of each equity index and determine if you understand how the index operates and the stocks that make up the index. Research the compilation and methods of each of the following equity indexes: Dow Jones, NASDAQ, Russell, Standard & Poor's, and the Wilshire equity index.

Research equity index annuities and funds for investment purposes The type of equity index investment vehicle you choose, if any, will depend on your risk tolerance level and the minimum return on that investment. Before you invest any business or personal funds in these equity index vehicles, you should know the historical return for each and the inherent risks involved.

I recommend:  Study the basics of equity index annuity, and then determine how you can invest in these investment products. Evaluate the index funds from some of the large investment houses like Charles Schwab, Fidelity and Vanguard. These companies offer everything from the traditional index fund to the no-load equity index funds to equity indexed bond funds.

Determine which of these equity index investments is best for your business Prudent investing depends on what type of risk you or your business can tolerate and the rate of return required.

I recommend:  Take a risk tolerance test to determine your specific risk tolerance limits. Then research the average returns you require for an investment and compare it to the average returns given the equity indices information.