A stock market index is a compilation of stocks grouped so that they act as an indicator of market trends within the index's area of focus. These indices, typically put together by the news media or financial services companies, show the current market trends and point you in the right direction so that you can make smart investments.
When looking for equity index providers to guide you in your financial investments, it's important to know exactly how each index is formulated and what each index is best at measuring. Consider the following information about index providers:
1. Most stock index providers measure either small cap indexes (companies with market capitalization between $300 million and $2 billion), mid cap indexes (market capitalization between $2 billion to $10 billion) or large cap indexes (market capitalization over $10 billion).
2. There are a few index fund providers that measure a total market index, including small, mid and large cap stocks.
3. Sector stock index providers measure the performance of a specific market only, such as biotechnology or transportation.
Examine the major U.S. index providersA U.S. stock index provider will measure the market trends for companies owned and operated out of the United States. There is a large range of U.S. index providers, with information on small, mid and large cap indexes and many that encompass all 3 for a total market index. If you have interest in keeping your investments in the national market, then use a U.S. market index to guide your investment strategy.
Consider stock index providers for sector indicesIf you wish to invest in a particular market or industry, a sector index provider is the right choice for you. Sector indices focus on particular markets and provide a measurement of the stocks for companies within that market.
Go global with the use of an international stock market indexWhile investing in national markets may provide a sense of loyalty to one's country, the global stock market can show a hefty return on your investments. There is an international stock market index for nearly every major manufacturing and exportation county in the world.
- Consult with a financial adviser before investing in any stock, regardless of its record on a market index. There is risk involved in stock investments and no guaranteed return, so be sure you choose a stock that best suits your financial needs.