Connect with us

Markets

What is a Stock Market Index?

Published

on

What is a Stock Market Index?

What is a Stock Market Index?

“How did the stock market do today?”

At surface, this seems like a simple question – but it’s also deceptively difficult to answer. The market can be defined as many different things, and there are actually over 100,000 publicly traded companies in the world to choose from.

Luckily, the use of a stock market index can help define a particular market, as well as track its performance in a way that is easy to reference.

Types of Indices

Today’s infographic from StocksToTrade.com defines a stock market index as a thermometer that measures the health of a group of stocks. When this particular group of stocks changes in value, the index follows it along.

A stock market index can track a group of stocks based on several different factors:

Global: Some indices, such as the MSCI All-Country World Index, aim to be a proxy for all global equities.

Regional Geography: A stock market index can also track a specific region, such as Europe. As an example, the EURO STOXX 50 tracks the performance of the largest and most liquid 50 stocks in the Eurozone.

National: Indices can also serve as a proxy for the performance of an entire country’s equities. The FTSE 100 in the United Kingdom tracks the 100 largest companies traded, which total to 81% of the total market capitalization of the exchange.

Industry: A stock market index can try to track the performance of an industry as a whole. The GDXJ, for example, is an ETF based on an underlying index that tracks the performance of smallcap mining companies focused on gold and silver.

Exchange: Indices also are used for specific exchanges. The S&P/TSX Venture Composite Index, for example, is used to represent the performance of companies that trade on the TSX Venture exchange in Canada.

Main Indices in the U.S.

Last year we did a graphical primer of the differences between the main indices and exchanges in the U.S., but we’ll summarize the major indices here as well.

S&P 500: First calculated in 1923, the S&P 500 covers the largest companies on the NYSE and Nasdaq exchanges in the United States, and represents $21.4 trillion in value.

Dow Jones Industrial Average: The DJIA is a price-weighted index of 30 significant companies traded on the NYSE and Nasdaq. It has a market capitalization of approximately $6 trillion, and was founded back in 1885.

Nasdaq Composite: Used more as a proxy for the technology industry, this index tracks 3,000 equities on the Nasdaq exchange, worth $6.8 trillion. It does include some companies not located in the U.S.

Interested in learning more about exchanges and indices? See the 20 largest stock exchanges in the world.

Click for Comments

Investor Education

The Top 5 Reasons Clients Fire a Financial Advisor

Firing an advisor is often driven by more than cost and performance factors. Here are the top reasons clients ‘break up’ with their advisors.

Published

on

Published

on

The following content is sponsored by Morningstar
This circle graphic shows the top reasons for firing a financial advisor.

The Top 5 Reasons Clients Fire a Financial Advisor

What drives investors to fire a financial advisor?

From saving for a down payment to planning for retirement, clients turn to advisors to guide them through life’s complex financial decisions. However, many of the key reasons for firing a financial advisor stem from emotional factors, and go beyond purely financial motivations.

We partnered with Morningstar to show the top reasons clients fire an advisor to provide insight on what’s driving investor behavior.

What Drives Firing Decisions?

Here are the top reasons clients terminated their advisor, based on a survey of 184 respondents:

Reason for Firing% of Respondents
Citing This Reason
Type of Motivation
Quality of financial advice
and services
32%Emotion-based reason
Quality of relationship21%Emotion-based reason
Cost of services17%Financial-based reason
Return performance11%Financial-based reason
Comfort handling financial
issues on their own
10%Emotion-based reason

Numbers may not total 100 due to rounding. Respondents could select more than one answer.

While firing an advisor is rare, many of the primary drivers behind firing decisions are also emotionally driven.

Often, advisors were fired due to the quality of the relationship. In many cases, this was due to an advisor not dedicating enough time to fully grasp their personal financial goals. Additionally, wealthier, and more financially literate clients are more likely to fire their advisors—highlighting the importance of understanding the client. 

Key Takeaways

Given these driving factors, here are five ways that advisors can build a lasting relationship through recognizing their clients’ emotional needs:

  • Understand your clients’ deeper goals
  • Reach out proactively
  • Act as a financial coach
  • Keep clients updated
  • Conduct goal-setting exercises on a regular basis

By communicating their value and setting expectations early, advisors can help prevent setbacks in their practice by adeptly recognizing the emotional motivators of their clients.

Visual Capitalist Logo

Curious about what drives investors to hire a financial advisor? Discover the top 5 reasons here.

Click for Comments

You may also like

HIVE Digital Technologies

Subscribe

Continue Reading
Visualizing Asia's Water Dilemma

Subscribe

Popular