Prior to getting to know briefly
about the 3 major indexes, namely, Dow Jones, NASDAQ, and S&P 500, an
important aspect that you must keep in mind is that you must not confuse the
New York Stock Exchange with these 3 major indexes. In
this write up, let us find out in brief, how the three differ and operate in
the financial market.
The differences between NASDAQ, S&P 500, and Dow Jones
It is a common thing to come across
in business headlines, news related to DJIA or Dow Jones Industrial Average,
Standard and Poor 500, and Nasdaq Composite. The health of the stock market is
usually determined by the indexes. Not only that the economy of the country can
also be ascertained to a great extent by these financial indicators.
Dow Jones
The DJIA is one of the most unique
stock market indicators and has 30 stocks included under it. And interestingly,
all of the 30 encompass the largest and so called “heavily traded” companies in
US and are also regarded as the richest. These 30 companies under “Dow” belong
to various sectors excluding the transportation and utilities segment that have
their own financial indicators under “Dow”. Majority of the investors bank
heavily on the performance of this indicator, however, you will find in due
course that it provides information relate d to the so called “blue chip”
stocks and their performance.
Standard & Poor’s 500
Standard & Poor’s the parent
company of S&P 500, is perhaps regarded as the “best single” indicator,
given the prevailing situation in United States. There are as many as 500
companies that are included under this indicator. These companies belong to
different sectors of the economy and have stocks that find their listings on
Nasdaq and New York Stock Exchange. If you take into account the major bulk of
stocks in the financial markets in US, around 75% of all the stocks in the US
are under S&P 500.
Nasdaq
The Nasdaq Composite has companies
under it that you will find listed on Nasdaq Stock Market and there are more
than 3300 stocks if all are taken into account. As such, it is broader in
nature. There are technology stocks more prominently. The Nasdaq 100 should not
be confused with Nasdaq Composite. The Nasdaq 100 as the name indicates has 100
companies included under it.
Fast facts of stock market indexes
- Published in the year 1896, “The WallStreet Journal” created it and was founded by Charles Dow.
- The S&P 500 appeared for the first time in the year 1957. S&P 500 and Dow Jones indexes are maintained by “S&P Dow Jones Indices”. It is a unit of Standard & Poor’s.
- The Nasdaq Composite started in the year 1971 and published by Nasdaq itself.
- Since each of these indexes have a set number of companies under it, the value of the individual indexes depend on the prices of the share stocks.
- Other factors that influence the value of the index include the current market value of the stocks/shares. Indexes are “weighted”.
DowJones includes companies belonging to sectors that include gas, sugar, tobacco, rubber,
electric, coal, leather, iron, cattle, and consumer goods to name a few. There
are stalwarts that include Nike, Goldman Sachs Group, United Health Group, Mc
Donald’s Corp, Exxon Mobile Corp, Walt Disney Co., and Boeing Co.