Most people have heard of the Dow Jones Industrial , as well as a few other well-known stock market that track the direction of the market. Indexes and serve as useful benchmarks against which investors can measure the performance of their own portfolios. Depending on its makeup, a stock index can give investors some idea about the state of the market as a whole or a certain sector of the market. Conceptually, a shift in the price of an index represents an equitable change in the stocks included in the index.
Basically, indexes are imaginary portfolios of securities that represent a particular market or section of the market. Each index has its own method of calculating a change in its base value, often expressed as a percentage change. Thus, you might hear that an index has risen or fallen by a certain percentage. Although you can’t invest directly in an unmanaged index, you can invest in an index mutual fund that attempts to mirror a particular index by investing in the securities that comprise the index. The performance of an unmanaged index is not indicative of the performance of any specific investment.
Mutual funds are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.
All the stocks in an index typically have at least one element in common. They might trade on the same stock market exchange, belong to the same industry, or have similar market capitalizations. Some of the more widely known indexes are the Dow, the S&P 500, the Nasdaq Composite, the Wilshire 5000, and the Russell 2000.