Indices
Indices provide a benchmark to measure the performance of an industry, sector, or an entire country’s stock market. Choose from over 100+ index futures, including the S&P500, UK 100, US 30, US Tech 100 and DAX 40.
What are Indices?
Indices are a measurement of the collective price performance of a group of shares in an exchange. Investors follow different market indices to analyse market movements. If, on average, the share prices of the constituent companies go up, the index will likely rise. And if they fall, it will likely drop.
For instance, one of the notable indices of the stock market, the FTSE 100 tracks the 100 largest companies on the London Stock Exchange (LSE). Trading indices help you to gain exposure across an entire economy or sector at one go.
What are Some Mainstream Indices?
There are seven types of indices to consider when trading indices — global, national, regional, exchange, currency, industry, and sentiment-based.
Type | Definition | Examples |
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Industry | Tracks stocks of companies in an industry, say, finance, technology, utilities, among others. | NASDAQ Biotechnology Index, Wilshire US REIT Index, PHLX Semiconductor Sector Index
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Currency | Tracks variations in the value a currency against other major currencies across the globe | Euro Index, US Dollar Index
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Exchange | Tracks stocks of companies listed in a particular exchange or group of exchanges | Euronext 100, OMX Nordic 40
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Regional | Tracks stocks of companies across certain regions including North America, Latin America, Europe, Asia, to name a few. | Asia: S&P Asia 50 Index, FTSE ASEAN 40 Index
Europe: FTSE Euro 100 Index, S&P Europe 350 Index |
National | Tracks stocks of major companies listed on a country’s largest stock exchanges | United Kingdom: FTSE 100 Index
Japan: Nikkei 225 Stock Average Index
Germany: The DAX (Deutscher Aktien index) 40 Index |
Global | Tracks stocks of companies from various regions across different types of businesses | MSCI World Index, S&P Global 100, Russell Global Index
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Benefits of Indices investing
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Indices offers consolidated exposure to a wide variety of stocks in one sector or country with just one trade. Take Dow 30, NASDAQ 100, FTSE 100, S&P 500, and DAX 40 for instance.
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Diversification in the index balances out the extreme fluctuations that arise during market volatility. While some of the constituent company’s share prices may fall over time, other company’s stock rallies might provide a cushion to the overall index.
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If a company's stock in your portfolio goes bankrupt, you could lose money on your investment. However, if you're trading an index, the company might be replaced by another that meets the criteria. The value of the bankrupt firm in the index may momentarily drop, or it might have no effect at all, depending on its weight in the index and the performance of its fellow participants.
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Indices carries a lower risk when compared with investing in individual stocks. Thereby, individual investors, looking to save for retirement, often choose to trade indices within their investing portfolio.
Steps to making your first investment
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Define your financial goals: Start by determining your investment objectives and the purpose of your investment.
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Assess your risk tolerance: Understand your risk tolerance, which refers to your comfort level with the potential ups and downs of the investment market.
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Meet with a financial consultant: to discuss your financial goals, risk tolerance, and investment preferences.
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Open an investment account: Complete the necessary paperwork to open an investment account. Provide the required identification documents and fill out any application forms.
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Fund your investment account: Transfer funds from your bank account to your investment account.
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Monitor your investments: Regularly review your investment portfolio and monitor its performance.
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Stay disciplined: Stick to your investment strategy and maintain a diversified portfolio.
Top Investment Assets
Vanguard S&P 500 ETF | VOO
Objective: 500 Index Fund seeks to track the performance of a benchmark index that measures the investment return of large-capitalization stocks.