Stock Market For Beginners » Stock market index

P/b ratio definition and p/b ratio explained in simple terms

admin — Wed, 09 Sep 2009 01:31:35 +0000

In one of my earlier posts I have explained what is the p/e ratio and the eps. Similar to the pe/ ratio is the p/b ration. P/b ratio is the ratio which is known as the price to book ratio.

It is calculated by dividing the current price by the book value per share. For stock market for beginners this ratio to be learnt is a must for good stock picking

What does it signify?

A low p/b ratio is a sign that the stock is undervalued and that this stock should be worth a lot more.

This book value is calculated based on the actual assets on the company’s books minus the actual liabilities.

Now there is a way to look at it is that if the p/b ratio is low then the company is not returning good earnings on its assets which means it is undervalued and you should check the reason for this before you buy the stock. The second way to look at is that the asset value on the balance sheet is wrong and that will mean that either the management is trying to do some jugglery or the company made some wrong decisions. In each case you should not be buying the stock.

Again this may work well in some industries and in some industries it may not as the tangible assets are not even there in the big IT companies or the software firms. Think Google(GOOG)

That is why as is the norm with all the ratios you need to make sure that you take them with a pinch of salt and treat them as indicators and not the ultimate tool to make buying decisions.

As far as the stock market terminology goes this definitely is there at par with all other terms like p/e ratio and ROE and RONW. Each of them is an indicator for performance which necessitates further investigation to find out the real gem in these stocks.

Buy index stock

admin — Wed, 05 Aug 2009 08:53:25 +0000

In my previous posts about buying of the stocks I have suggested you that you should buy gas stocks or the buy foreign stocks but this time I just saying that you buy index stocks and enjoy the market vagaries from a distance. The benefit is that when you buy index stocks will be mirroring the market and hence you need not invest in individual funds.

If you need to invest in index funds then you need to understand how Dow Jones works as well as know what is Nasdaq before you can even think of investing in the so called index funds

The stock index has a list of companies which are there based on the certain criteria and each of these stock prices are used to calculate the stock index. For example Russell 2000 has about 2000 small cap stocks which are tracked.

The index tracking stocks which is there and is most commonly used is the S&P 500 index stock which is actually and electronically traded fund called spider or the SPYder. The there is another which is the Diamond Series Trust Stocks which tracks the Dow Jones industrial average.

Apart from that the really low cost method of investing is to invest in the Index funds. These funds merely have the same composition as the stock market indices and almost all the big mutual fund companies have this type of stock index.

The example of this are the

Vanguard 500 which tracks S&P 500.

The benefit of having an index fund that they have generally very low fees or rather no management fees as there is no actively managing the stocks on those funds. The added benefit is that you do not have to worry about diversification and it is automatically granted in an index fund. You can buy the shares of an index fund in the same way as that of the mutual funds which means at the NAV. Check this if you can get rich off the mutual funds.

A lot of investors then ask that how much you can make and the truth is that you can actually make at least as much as the S&P grew in the last few years. Just imagine that is what will be there based on the mere passivity of the investment.

Now if you want to have more active involvement and try to do the dollar cost averaging then you may be able to enjoy a lot of success and may be even better the returns in the index funds.

The most famous NASDAQ tracking stock is an ETF which is

Nasdaq-100 Index Tracking Stock (QQQ:AMEX)

iShares Russell 2000 (IWM)

iShares MSCI EAFE (EFA)

Total Stock Market VIPERs (VTI) – This represents the broader 5000 Wilshire index fund.

The other thing to note is that if you really want to do your own labor here then you may even better your performance by getting the list of the S&P 500 stocks or the list of Dow Jones stock or even the list of Nasdaq 100 stocks and start them adding to your portfolio.

If you want to know more about the stock market strategies then read my earlier post on stock investment strategies and also on stock analysis checklist

Explaining the Dow Jones Index for beginners – what is DJIA

admin — Wed, 05 Aug 2009 08:48:44 +0000

As stock market for beginners guide I have explained NASDAQ at length in one of my earlier posts and also I have made sure that you have adequate understanding of Dow Jones index.

However It seems that post was not enough for people to understand the Dow Jones index as beginners. That is why this post will help you understand Dow Jones in pure simple terms.

Let us begin at the very simple definition of a stock market index.

A stock market index is what is needed to help you track the market. In general it is a way to tell the broader market direction. The broader market will I turn tell the health of the economy.

Then somebody thought of this and took a group of securities and decide that their simple average of the prices will be like and index.

Then you compare yesterday’s index with today’s and say that the broader market was up or below the previous day index. Now if it was simple average then a company with huge price will be able to manipulate the index and hence they have weighted average so as to discount the theory that one company can potentially influence the stock market movement.

The Dow Jones industrial 30 companies are carefully selected and the index is calculated very carefully and here is the current list of the Dow Jones stock list and I have the Dow Jones industrial 30 companies symbols.

3m Co (MMM)

Alcoa Inc (AA)

American Express Company (AXP)

AT&T Inc (T)

Bank of America Corporation (BAC)

Boeing Co (BA)

Caterpillar Inc (CAT)

Chevron Corp (CVX)

Cisco Systems Inc (CSCO)

E.I. du Pont de Nemours and Company (DD)

Exxon Mobil Corp (XOM)

General Electric Company (GE)

Hewlett-Packard Co. (HPQ)

Intel Corporation (INTC)

International Business Machines (IBM)

Johnson & Johnson (JNJ)

JP Morgan & Chase & Co (AMJ)

Kraft Foods Inc (KFT)

McDonald’s Corporation (MCD)

Merck & Co., Inc. (MRK)

Microsoft Corporation (MSFT)

Pfizer Inc (PFE)

The Coca-Cola Company (KO)

The Home Depot, Inc.(HD)

The Procter & Gamble Company (PG)

Travelers Companies Inc (TRV)

United Technologies Corporation (UTX)

Verizon Communications (VZ)

Wal-Mart Stores, Inc. (WMT)

Walt Disney Company (The) (Holding Company) (DIS)

So how does the Dow Jones work and how the Dow Jones is computed and measured.

The average price of the 30 stocks is taken and then divided by a divisor. It is this divisor which is calculated and adjusted based on the splits, mergers and the overall weight of each stock. If this divisor was 1 then assuming Dow Jones is a stock then the stock price is simply the average stock price of each stock. This weight for each is calculated by the price weightage method.

The Dow Jones closing history and the Dow Jones closing stock charts will tell us that the market has invariably gone through a lot of ups and downs and each time it has rebound and has given the amazing returns tom investors and in turn also giving out some good market gurus like Warren Buffet.

Then there are other set of industrial averages related to each industry which are tracked by a lot of people and these are collectively known as Dow Jones Industrials. This is important for understanding the stock market

NASDAQ 100 pre market indicator and the NASDAQ 100 after Hours Indicator

admin — Mon, 27 Jul 2009 21:51:19 +0000

As with regular indices whereby most of the trading activity and the broader market movement is represented either by the use of the Dow Jones index or the NASDAQ 100 . Similarly there is the NASDAQ 100 pre market indicator which will tell how the market is behaving in the pre market trading hours

This indicator is calculated using the last traded prices of the security in the times between 8.00 AM – 9.30 AM EST.

The NASDAQ 100 After hours indicator is given about in the time 4:00 PM – 6.30 PM EST .

I would suggest that people use this as a good indication of the stock market behaviors before the stock market opens up but yes there are chances that market may open up differently.

I would caution stock market beginners to use this as a gauge but seasoned professional should definitely be using this.

You can easily get the pre stock market quote and the after hours market quote by using the symbol or quote of the company that are you are using and enter it the way you will in the regular trading session

How to buy and sell stocks after hours and in pre market

admin — Mon, 27 Jul 2009 21:44:11 +0000

Most of the people think that trading means the regular trading between regular hours and that will between 9.30 am and 4pm EST. However this is not true and the answer is yes to the question about can you buy stock and sell stock after hours and in pre market.

Regular trading time is 9.30 am– 4 pm EST

Premarket trading hours are between 7 am – 9.30 am

After hours trading hours are from 4.00 am – 8.00 pm EST.

Before I suggest as to how to buy in the pre market you need to know what ECN’s are.ECN’s are known as Electronic communication networks.

What are ECN’S?

ECN’s are also known as the Alternative trading systems. They are huge communication networks that automatically match the buyers and the sellers with each other and make sure that like in regular trading the buyer and the seller match and trade executes.

Initially these were only open to market makers and broker–dealers and the institutional investors but now they are open to general public.

These ECN’s are linked to the NASDAQ via the Selectnet

The names of the ECN’s out there currently are

Instinet,

Island

Tradebook

ArchIpelago

REDIbook,

BRUT,

Attain,

Nextrade

MarkeXT

Most of the listed securities in NASDAQ are also traded on these ECN’s

There are risks involved with buying the shares after hours and pre market hours and these are that you will generally have less liquidity as the number of buyers and sellers for a particular stock will be less.

Also in general there will be a tough chance that you will as a individual investors will be able to compete with the people who are there and those are the professional mangers from mutual fund companies as well as institutional brokerages.

The benefit is that you may get a leg up on the competition as most companies announce their results after hours and you will be able to net in some gains. That said there is no sure shot way that you can predict the stock market opening the next day and hence be very careful when you buy stocks.

Most brokerage companies offer the extended hours trading facility so if you have a discount brokerage firm then they generally will offer the extended hours facility via one of the ECN’s I have listed above. Some may use the Instinet or some may use Archipelago.

So if you are signing up a new brokerage account then check if they have premarket and the after hours trading facility.

NASDAQ pre market

NASADQ has an indicator called the NASDAQ 100 pre market indicator which can tell how the market is moving in the pre market.

NASDAQ after hours

NASDAQ 100 after hours indicator will be able to tell you how the market doing in the after hours. It is similar to the NASDAQ 100 apart from the fact that it will help you invest in the after hours seeing the trend of the market.

Stock Market High and Low for beginners

admin — Tue, 23 Dec 2008 08:15:57 +0000

The stock market has seen its share of high and low and that alone cause the money to be made by millions of investors. There are various theories and charts people use to buy and sell at prices which can be deemed as high by someone and low by someone else based on what their prediction is of the future.

Some investors use the fundamental analysis to analyze a particular stock and some use the technical analysis to write about a stock and then there are various folks who just go by their gut feel about the stock market high and make a decision based on that. Just to give you an example the stock market was at an all time high and when I say the stock market then by that I mean the Dow Jones Industrial Average or simple Dow the stock market high was in Oct of 2007 when it reached the high of 14000 something.

Some folks thinking that there is money to be made would have bought the stocks at point in time and some would have sold at that point in time thinking that the market was at an all time high. That is the whole dilemma of the normal investing crowd and that is that they want to time the market which is usually not the case and you can never time the market .

In fact those who bought the stocks at a market high would have gained some money for a while but since after that the market crashed and now in 2008 the market has fallen back to it spre rally levels those folks who sold the stocks at that level would now be waiting for the right time to enter the market as that is opportune time plus they are sitting on a pile of cash when they sold the stocks at the peak of the market.

For example going by the inflation adjusted numbers the all time low of Dow Jones was 28.48 in 1896. Well that may not be a good indicator but yes there is nothing to suggest that market lows cannot be there. As a stock market for beginners lesson the important thing to note is that you should keep changing your strategy and look for returns wherever possible and if you do not have the time and the money to invest in stocks then you should actually try use the theory of averaging and put your money in two things and those are mutual funds of good firms and or the money in safe things money market mutual funds or CD’s

But beware in todays gloomy scenario where banks are actually at the receiving edge of a lot of massive outflows you also need to tread cautiously. In gist the stock market high or stock market low is just a psychological thing and it really depends on what kind of stock market investing would you do.

What is the definition of NASDAQ

admin — Mon, 20 Oct 2008 13:38:17 +0000

As a stock market for beginners information there are two main things that need you need to know as an investor which are primarily the Dow Jones Industrial Average and the NASDAQ but then there are other things that you may need to understand as you go into that deeper about the working of NASDAQSome of the basic things that I am going to cover is the

NASDAQ Definition

NASDAQ components

NASDAQ holidays

Dow Nasdaq and what do they mean to you

NASDAQ ticker

NASDAQ chart

Let us start with NASDAQ history and how it all started. NASDAQ was started in 1971 by the National Association of Securities Dealers and at that time it was just a bulletin board service providing the quotes and there was no way that you can connect buyers and sellers .

Since then it has gone to form the computer based trading where the trades go through a electronic system and the buyers and sellers get connected via computer based trading facility.

As far as the company that owns NASDAQ, it is the NASDAQ-OMX group which now owns the Nordic based exchange OMX also has control of the Philadelphia stock exchange called PHLX and it now as about eight stock exchanges in Europe. It also has the stake in Dubai Stock exchange and that means it is now a serious competition to NYSE -Euronext.

I will explain difference between NASDAQ and NYSE a little later in the post because a stock market for beginners you should know that.

NASDAQ Stands for National Association of Securities Dealers Automated Quotation.

This NASDAQ definition now kind of gives enough insight into what the exchanges was supposed to give originally and how it works in an automated fashion.
NASDAQ after hours trading

NASDAQ offers after hours trading and pre market trading in between the following times which means that you can gauge the market sentiment before the market opens up for that day and also get to trade in the post market session to make sure that you can take part in stock market activity in case of any news and any other big happening after the market close. Then you ca go ahead and buy stock when the market opens.

Pre Market – 7AM-9.30 AM

After hours session is – 4:00PM -8:00PM

What is NASDAQ 100 and what is NASDAQ composite.

These are two main indices which NASDAQ offers and I will explain NASDAQ 100 to help you understand how the NASDAQ index works.

But first the listing of the NASDAQ 100 companies and these companies may change from time to time

Company Name

Activision Blizzard, Inc (ATVI)

Adobe Systems Incorporated(ADBE)

Akamai Technologies, Inc.(AKAM)

Altera Corporation(ALTR)

Amazon.com, Inc.(AMZN)

Amgen Inc.(AMGN)

Amylin Pharmaceuticals, Inc.(AMLN)

Apollo Group, Inc.(APOL)

Apple Inc.(AAPL)

Applied Materials, Inc.(AMAT)

Autodesk, Inc.(AUD)

Baidu.com, Inc.(BIDU)

Bed Bath & Beyond Inc.(BBBY)

Biogen Idec Inc(BIIB)

Broadcom Corporation(BRCM)

C.H. Robinson Worldwide, Inc.(CHRW)

CA Inc.(CA)

Cadence Design Systems, Inc.(CDNS)

Celgene Corporation(CELG)

Cephalon, Inc.(CEPH)

Check Point Software Technologies Ltd.(CHKP)

Cintas Corporation(CTAS)

Cisco Systems, Inc.(CSCO)

Citrix Systems, Inc.(CTXS)

Cognizant Technology Solutions Corporation(CTSH)

Comcast Corporation(CMCSA)

Costco Wholesale Corporation(COST)

Dell Inc.(DELL)

DENTSPLY International Inc.(XRAY)

Discovery Communications, Inc(DISCA)

DISH Network Corporation(DISH)

eBay Inc.(EBAY)

Electronic Arts Inc.(ERTS)

Expedia, Inc.(EXPE)

Expeditors International of Washington, Inc.(EXPD)

Express Scripts, Inc.(ESRX)

Fastenal Company(FAST)

Fiserv, Inc.(FISV)

Flextronics International Ltd.(FL;EX)

FLIR Systems, Inc.(FLIR)

Focus Media Holding Limited(FMCN)

Foster Wheeler Ltd.(FWLT)

Garmin Ltd.(GRMN)

Genzyme Corporation(GENZ)

Gilead Sciences, Inc.(GILD)

Google Inc.(GOOG)

Hansen Natural Corporation(HANS)

Henry Schein, Inc.(HSIC)

Hologic, Inc.(HOLX)

IAC/InterActiveCorp(IACI)

Infosys Technologies Limited(INFY)

Intel Corporation(INTC)

Intuit Inc.(INTU)

Intuitive Surgical, Inc.(ISRG)

Joy Global Inc.(JOYG)

Juniper Networks, Inc.(JNPR)

KLA-Tencor Corporation(KLAC)

Lam Research Corporation(LRCX)

Lamar Advertising Company(LAMR)

Leap Wireless International, Inc.(LEAP)

Level 3 Communications, Inc.(LVLT)

Liberty Global, Inc.(LBTY)

Liberty Media Corporation(LMDI)

Linear Technology Corporation(LLTC)

Logitech International S.A.(LOGI)

Marvell Technology Group, Ltd.(MRVL)

Microchip Technology Incorporated(MCHP)

Microsoft Corporation(MSFT)

Millicom International Cellular S.A.(MICC)

Monster Worldwide, Inc.(MWW)

NetApp, Inc.(NTAP)

NII Holdings, Inc.(NIHD)

NVIDIA Corporation(NVDA)

Oracle Corporation(ORCL)

PACCAR Inc.(PCAR)

Patterson Companies Inc.(PDCO)

Paychex, Inc.(PAYX)

PetSmart, Inc(PETM)

QUALCOMM Incorporated(QCOM)

Research in Motion Limited(RIMM)

Ryanair Holdings plc(RYA)

SanDisk Corporation(SNDK)

Sears Holdings Corporation(SHLD)

Sigma-Aldrich Corporation(SIAL)

Sirius XM Radio Inc.(SIRI)

Staples, Inc.(SPLS)

Starbucks Corporation(SBUX)

Steel Dynamics, Inc.(STLD)

Stericycle, Inc.(SRCL)

Sun Microsystems, Inc.(JAVA)

Symantec Corporation(SYMC)

Teva Pharmaceutical Industries Limited(TEVA)

The DIRECTV Group, Inc.(DTV)

VeriSign, Inc.(VRSN)

Vertex Pharmaceuticals Incorporated(VRTX)

Virgin Media Inc.(VMED)

Whole Foods Market, Inc.(WFMI)

Wynn Resorts, Limited(WYNN)

Xilinx, Inc.(XLNX)

Yahoo! Inc.(YHOO)

There are certain criteria as to why and how the company is included into the index but primarily the main criteria is

1. The security’s U.S. listing must be exclusively on the Nasdaq National Market (unless the security was dually listed on another U.S. market prior to January 1, 2004 and has continuously maintained such listing);

2. The security must be of a non-financial company;

3. The security may not be issued by an issuer currently in bankruptcy proceedings;

4. The security must have average daily trading volume of at least 200,000 shares;

NASDAQ 100 is the stock market index of 100 largest domestic and international non-financial companies on the NASDAQ. This index is the modified market value weighted index, which essentially means that companies have weights based on the market capitalization.

Two main differences between NASDAQ 100 and Dow Jones and S&P 500 is that these companies do exclude non financial companies from being part of the index and also these do not have the non US companies in the index which NASDAQ does have.

Again I will explain what is difference between NASDAQ-100 and the NASDAQ Composite which is commonly referred to as the NASDAQ in the media.

NASDAQ composite is the stock market index of all the common stocks and similar securities which includes ADR’s, tracking stocks and limited partnership interests. What this means is that NASDAQ composite has about 3000 components which practically all the stocks that are listed on the NASDAQ.

It is followed very thoroughly as an indicator of the performance of the US economy and that means that it is a true indicator of the health of the technology stocks and the growth stocks.

When NASDAQ composite was launched

NASDAQ composite was launched in 1971 with a base of 100 points and this index is market capitalization weighted.

Here is what the NASDAQ site has to say about it as far inclusion criteria goes “To be eligible for inclusion in the Composite the security’s U.S. listing must be exclusively on the Nasdaq Stock Market (unless the security was dually listed on another U.S. market prior to January 1, 2004 and has continuously maintained such listing), and have a security type of either:

American Depositary Receipts (ADRs)
Common Stock
Limited Partnership Interests
Ordinary Shares
Real Estate Investment Trusts (REITs)
Shares of Beneficial Interest (SBIs)
Tracking Stocks

Security types not included in the Index are closed-end funds, convertible debentures, exchange traded funds, preferred stocks, rights, warrants, units and other derivative securities. ”

Something on the NASDAQ Penny Stock List

Penny stocks have no minimum listing requirements and hence they are traded on the OTCBB exchange and as far as the penny stocks on NASDAQ go they were there when the tech bubble burst but they either have to shore up their balance sheets or they have to delist.a Always research properly before investing.

Understanding Dow Jones Industrial Average

admin — Thu, 16 Oct 2008 13:56:32 +0000

As a stock market for beginners guide I think the most important point to know is to that how the stock market drives it index and who or what is Dow Jones and what does it mean to you when you see the index up or down.

Dow Jones as company was formed by three folks Charles Henry Dow, Edward Davis and Charles Milford Bergstresser. They started an afternoon bulletin newsletter called the Customers Afternoon Letter which later became the “The Wall Street Journal” as we call it today.

In 1896 the Dow Jones Industrial Average or DJIA was officially launched and at that time it had 12 companies which comprised of the DJIA and they were

American Cotton Oil

American Sugar

American Tobacco

Chicago Gas

Distilling & Cattle Feeding

General Electric

Laclede Gas

National Lead

North American

Tennessee Coal & Iron

U.S. Leather (preferred)

U.S. Rubber

If you scan the list you will see that only one company from the original list is now in the DJIA.

How the Dow Jones indexes are calculated was based on the initial simple methodology that they are prices weighted and market capitalization weighted which means that they do not take into account the market capitalization of the shares or the shares outstanding in simple language and in fact they only take into account the prices.

So in the initial days the prices all the 12 companies were added and divided by 12 but now that divisor is calculated using formula so that it takes into account stock splits and other actions like mergers or acquisitions.

The current divisor is like this 0.1255527090 it is based on the calculation shown above.

Now each of the components is definitely assigned a weight so that they can be better aligned with what the market thinks about them and their

To answer a question about how many companies make up the Dow Jones Industrial Average index the answer is 30 stocks.

3M Co.	New York SE	MMM	N/A	Diversified Industrials	Broad	5.0568	59.62
Alcoa Inc.	New York SE	AA	N/A	Aluminum	Broad	1.1722	13.82
American Express Co.	New York SE	AXP	N/A	Consumer Finance	Broad	2.3155	27.30
AT&T Inc.	New York SE	T	N/A	Fixed Line Telecommunications	Broad	2.2112	26.07
Bank of America Corp.	New York SE	BAC	N/A	Banks	Broad	1.9330	22.79
Boeing Co.	New York SE	BA	N/A	Aerospace	Broad	3.9932	47.08
Caterpillar Inc.	New York SE	CAT	N/A	Commercial Vehicles & Trucks	Broad	4.1968	49.48
Chevron Corp.	New York SE	CVX	N/A	Integrated Oil & Gas	Broad	5.9279	69.89
Citigroup Inc.	New York SE	C	N/A	Banks	Broad	1.3359	15.75
Coca-Cola Co.	New York SE	KO	N/A	Soft Drinks	Broad	4.0085	47.26
E.I. DuPont de Nemours & Co.	New York SE	DD	N/A	Commodity Chemicals	Broad	3.1578	37.23
Exxon Mobil Corp.	New York SE	XOM	N/A	Integrated Oil & Gas	Broad	6.1985	73.08
General Electric Co.	New York SE	GE	N/A	Diversified Industrials	Broad	1.7812	21.00
General Motors Corp.	New York SE	GM	N/A	Automobiles	Broad	0.5522	6.51
Hewlett-Packard Co.	New York SE	HPQ	N/A	Computer Hardware	Broad	3.5115	41.40
Home Depot Inc.	New York SE	HD	N/A	Home Improvement Retailers	Broad	1.8414	21.71
Intel Corp.	NASDAQ NMS	INTC	N/A	Semiconductors	Broad	1.4453	17.04
International Business Machines Corp.	New York SE	IBM	N/A	Computer Services	Broad	7.8210	92.21
Johnson & Johnson	New York SE	JNJ	N/A	Pharmaceuticals	Broad	5.3164	62.68
JPMorgan Chase & Co.	New York SE	JPM	N/A	Banks	Broad	3.5615	41.99
Kraft Foods Inc. Cl A	New York SE	KFT	N/A	Food Products	Broad	2.4029	28.33
McDonald’s Corp.	New York SE	MCD	N/A	Restaurants & Bars	Broad	4.8558	57.25
Merck & Co. Inc.	New York SE	MRK	N/A	Pharmaceuticals	Broad	2.4953	29.42
Microsoft Corp.	NASDAQ NMS	MSFT	N/A	Software	Broad	2.1612	25.48
Pfizer Inc.	New York SE	PFE	N/A	Pharmaceuticals	Broad	1.4148	16.68
Procter & Gamble Co.	New York SE	PG	N/A	Nondurable Household Products	Broad	5.3681	63.29
United Technologies Corp.	New York SE	UTX	N/A	Aerospace	Broad	4.5912	54.13
Verizon Communications Inc.	New York SE	VZ	N/A	Fixed Line Telecommunications	Broad	2.4538	28.93
Wal-Mart Stores Inc.	New York SE	WMT	N/A	Broadline Retailers	Broad	4.6226	54.50
Walt Disney Co.	New York SE	DIS	N/A	Broadcasting & Entertainment	Broad	2.2663	26.72

It is Dow jones Industrial average that is know by the world over as the primary index and is tracked by the entire US nation as well as the world as an indicator of the world health economy.

I hope the above tutorial will answer your question about what is the Dow Jones industrial average and will help you better invest in the market.

Now of course the whole Dow Jones index has taken a separate meaning with various Dow Jones index in the market like the Dow Jones finnacila index

Dow Jones Transportation index and dow jones real estate index. And each has the same type of calculation to track and calculate the index.

If you are looking for a dow jones history chart then you need to go their website and get the chart with on a decade by decaed basis.

Stock Market investing for beginners – What is a Stock Market Index?

admin — Sat, 12 Apr 2008 07:36:10 +0000

Another major component of understanding the stock market is getting to know what the stock market index is and how its movement signifies the trend and how it can be help you trade in the stock market.

Of course you would have heard stories about the 1929 crash or the 1987 stock market crash and it being called the Black Monday. On that day the stock market index called the Dow Jones Index plummeted by 22.6% and shed 508 points.

What is Dow Jones Industrial Average and what does it mean for you stock market for beginners investor.Does the moment reflects a loss or a gain for you and how can you earn by tracking the movement of the index.

Another name for the Dow Jones Industrial Average is DJIA or Dow 30 or simply The Dow or Dow Jones. It was created by the Wall Street Journal editor and co-founder of the Dow Jones & Company Charles Dow.

DJIA consists of 30 stocks of the largest and most widley held public companies of the United States. This in mathematicla terms is price weighted average of the 30 stocks. To calculate this the sum of all the prices of the 30 stocks is divided by a divisor. This dow divisor is actually less than one and is adjusted for any stock splits or changes occurring to the underlying 30 stocks.

So you would argue that Dow Jones is really the average of the 30 stocks only and does not reflect the whole market. Yes, correct some would argue but on other side you have those 30 stocks across industries and as widely held as possible which are more likely to give an indication of the market moods and directions and also you can compare the average historically to gain more insights into the macro trends of the market.

Several other indexes are now popular since with the advent of technology and many other exchanges. A few notable indexes among them are

NASDAQ -100, S&P 500, Russell 300, FTSE30(for theLondon stock exchange,BSE 30(India – Bombay Stock Exchange) or the Hang Seng Index(Hong Kong stock Exchange).

As you learn the stock market for beginners basics, the movement of the index would give you some idea of how the health of the economy is and how the stock market is taking it. On the other hand it may sometimes mean that even though the stock market index is rising you particular stock may not be because of lot of other factors like the industry it is in, the management of the company and how that individual company is doing in terms of the market expectations.

In this age a lot of stock market traders rely on a combination of indices like a sector specific index as well as broader index like Dow Jones or S&P 500 to track the progress of the overall market as well as the sector in which their stock is.

So as a beginner you should for now keep track of the progress of the index to gauge the market sentiment but be aware of the industry,the management,the sector your stock is in to make money by trading in stocks.