Do you know the differences in stock indexes? What does “The stock market” mean?

You may have seen/heard on the news that “the market went up/down….” What does “the market” mean in the US? Typically they are referring to either the Dow Jones Industrial Index (aka “the Dow Jones”) or the Standard & Poors 500 index (aka “S&P 500”). The key difference? The Dow Jones tracks 30 “prominent” large companies stock prices from various US stock markets. The S&P 500 tracks the stock prices of the 500 largest companies listed on US stock markets. We feel the Dow Jones is quite an inadequate to track the US stock market performance. Not just because it only tracks 30 companies but also it’s inexact way to decide which companies are included. If you’d like to read more about the indexes, be sure to click the links.

Next time you hear news outlets mention how markets are doing: dig deeper. Find out what index they are referring to and listen whether they say how many points up/down or the percent the markets are up/down. Most outlets say points. Why? Because it’s more dramatic and “sells” the news. Pay attention. We do.

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