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Stock index: Top national and international stock indices

Anyone interested in developments on the international financial markets will quickly come across a large number of different stock indices. The price development or value development of several combined stocks can be read from a stock index. A stock index thus also shows macroeconomic development. The composition of the index decides exactly which one.

What is a stock index?

One thing first: stock indices are not stocks. Rather, “index” means a bundling of several stocks or stock corporations. The index price thus reflects their joint development. A stock index can be compiled according to various criteria. Depending on its composition, an index can be, for exampleregional market or oneBranch depict. For example, the Euro Stoxx 50 includes the 50 largest listed companies in the Eurozone in terms of market capitalization, while the TecDax includes the 30 largest technology companies in Germany. Investors can use the share price of a structured composite share index to a certain extentdevelopments an industry or region.

Important stock indices at a glance:

Germany

Europe

  • CAC 40
  • SMI
  • ATX
  • Euro Stoxx 50
  • FTSE 100

United States

Asia

Weighting of the stocks in the index

In this context, the weighting of the individual stocks in the index plays a decisive role. The question is: What is the share of a stock corporation in the index? The weighting of a stock corporation is calculated from itsMarket value on the one hand and theNumber of freely tradable shares, the so-called free float, on the other hand. The weighting therefore reflects the market capitalization of a company.

In order for a stock index to be as meaningful a trend meter as possible, it is important that individual stocks in the index are not weighted too heavily, even if the market capitalization would require a higher weighting. Because too much weighting of a stock would change the stock indexdistort. It would be an inaccurate stock market barometer. The company that determines the index, such as Deutsche Börse AG for the DAX, decides on the specific composition. Newspapers are also involved in calculating some indices, for example the Financial Times on the British FTSE 100 or the Wall Street Journal on the Dow Jones.

Functions of the stock indices

In addition to its indicator function for certain market developments and trends, a stock index fulfills other functions. ETFs (Exchange Traded Funds), exchange-traded index funds, are always based on a stock index. With the purchase of the fund shares it is possible for investors to invest in the corresponding regional market or a certain industry - as a whole. If an investor buys units in such a fund, he is also investing in all companies that are in this fund.

In addition, the indices also serve asQuality meter of the work of fund managers. The share index therefore also plays an important role for actively managed funds. Actively managed funds, as the name suggests, are actively managed by fund managers. For these - and their customers - a stock index then serves as aBenchmark, i.e. as a benchmark against which the manager's work can be measured. The fund manager puts together a portfolio of stocks and tries to outperform the market - represented by a reference index. In fact, very few fund managers succeed in doing this in the long term.

Anyone interested in an index fund as an investment should find out in advance whether the ETF will distribute or reinvest profits. Automatic reinvestment means an additional compound interest effect, which has a positive effect on the returns achieved.

Price index and performance index

A price index shows the performance without dividends and changes in capital, here only the pure share prices count. In contrast, a performance index is calculated as if dividends paid were reinvested in the index. This reflects aPerformance index more precisely as a price index reflects the performance. However, this has the negative effect that over time a performance index deviates from the actual total value of the stocks it tracks. Many stock indices are calculated both as a price index and as a performance index, for example the DAX. The Dow Jones Industrial Average, for example, is different: This is only given as a price index.

The main indexes in the world

Stock indices can be broken down intodifferent categories subdivide: There are, for example, blue-chip indices, country or region indices, industry or sector indices and strategy indices. They all represent different markets. If you want to invest less in individual company shares and more in entire industries or regional markets, you should orientate yourself on a corresponding index. Various index categories are listed below. A number of important indices are assigned to each category.

Blue chip indices

A blue chip index comprises the largest companies in a country or region in terms of market capitalization. That does not necessarily mean that the index includes all blue chips - the national onesMarket leaders in their industries - contains, the index usually only includes some of these companies.

DAX 30

  • Most important German share index with the 30 largest companies in the country
  • Usually given as a performance index
  • Frankfurt Stock Exchange

CAC 40

  • Most important French share index with the 40 largest companies in the country
  • Only given as a price index
  • Euronext Paris

SMI

  • Most important share index in Switzerland
  • Only given as a price index
  • SIX Swiss Exchange

ATX

  • Most important share index in Austria
  • Only given as a price index
  • Vienna Stock Exchange

Dow Jones Industrial Average

  • Most important US stock index with the 30 largest companies in the country
  • Only given as a price index
  • NASDAQ, New York Stock Exchange (NYSE)

CSI 300

  • Most important Chinese stock index with the 300 largest companies in the country
  • Usually given as a performance index
  • Shanghai Stock Exchange (SSE), Shenzhen Stock Exchange (SZSE)

Nikkei 225

  • Most important Japanese stock index with the 225 largest companies in the country
  • Only given as a price index
  • Tokyo Stock Exchange (TSE)

Hang Seng

  • Most important stock index in Hong Kong
  • Only given as a price index
  • Hong Kong Stock Exchange

BSE Sensex

  • Most important Indian stock index
  • Only given as a price index
  • Bombay Stock Exchange (BSE)

FTSE 100

  • Most important UK stock index with the 100 largest companies in the country
  • Only given as a price index
  • London Stock Exchange

RTS index

  • Most important Russian stock index with up to 50 of the largest companies in the country
  • Only given as a price index
  • Moscow Stock Exchange (MICEX-RTS)

Industry or sector indices

Industry or sector indices form the performanceindividual economic sectors such as the pharmaceutical industry. There are indices in which only shares of technology companies or those that represent the pharmaceutical industry are included.

TecDax

  • Index of the 30 most important German technology stocks
  • Price and performance index relevant
  • Frankfurt Stock Exchange

NASDAQ Composite

  • Index of 3,000 US technology stocks
  • Only given as a price index
  • NASDAQ

Country and region indices

These indices contain shares of companies that can all be assigned to a country or region. Strictly speaking, blue-chip indices naturally also map a country or region. But the focus of blue-chip indices on the economically strongest companies in a country corresponds less to the market itself and is therefore used for assessing theDevelopment of a country as a whole rather unfavorable.

Euro Stoxx 50

  • Includes the 50 largest listed companies in the Eurozone
  • Mostly shown as a price index
  • Stoxx Ltd. (Zurich)

S&P 500

  • Index of the 500 largest listed US companies
  • Price index (S&P 500 TRN is the corresponding performance index)
  • NASDAQ, New York Stock Exchange (NYSE)

MSCI World

  • The MSCI World is a global index with stocks from 23 industrial nations
  • 3 variants: price index, performance index with and without consideration of withholding taxes
  • Global: Calculated by Morgan Stanley Capital International

MSCI Emerging Markets Index

  • Global index with stocks from 23 emerging countries
  • Price index
  • Global: Calculated by Morgan Stanley Capital International

MDAX

  • German share index with the 50 largest companies that are not listed in the DAX
  • Calculated as both a price and a performance index
  • Frankfurt Stock Exchange

SDAX

  • German share index with the 50 largest companies that are not listed in the DAX and MDAX
  • Calculated as both a performance index and a price index
  • Frankfurt Stock Exchange

Strategy index

A strategy index follows - as the name suggests - a specific oneInvestment strategy. Accordingly, no binding statement can be made about the composition of such indices. Often, however, they not only include stocks but also other financial products such asDerivatives.

ShortDAX

  • Orientates itself on the DAX, but replicates its development in inverse proportion
  • Usually calculated as a performance index
  • Frankfurt Stock Exchange

The stock index and your own investment

If you want to get an initial overview of a market or industry on the stock exchange, you can use an index, for example. Shares contained in this index can be bought through a suitable index fund, for example. Funds and other financial products can be bought through an online broker, for example. Before deciding on a broker depot, the conditions should be compared with a depot comparison.

Content Manager (until May 2021)
Matthias worked for various comparison portals from 2015 to 2021. His main focus was on securities accounts, health and pension insurance, and construction finance.

Read last article by Matthias Haft:

Matthias worked for various comparison portals from 2015 to 2021. His main focus was on securities accounts, health and pension insurance, and construction finance.

Read more articles by Matthias Haft:

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