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A Fool's Introduction to Indexes
Motley Fool Index Center
How many times have you heard someone ask, "How'd the market do today?" Yet, on any day every single investor had a different experience in "The Market," since no two portfolios are exactly alike (unless you're a copycat, but that's another issue). Back in 1896, Charles Dow created a benchmark of 12 large U.S. companies to serve as a marker for how well stocks performed on a daily basis. That same measuring stick exists today in the form of the Dow Jones Industrial Average (DJIA), the most influential stock index in the world.
But the Dow cannot be all things to all people, so here we also look at a few of the other major indexes that have sprung up over the years. We've gathered some basic facts and figures, such as:
- Top-weighted companies
- Industry composition
- Performance over 1- and 3-year periods
- Strengths and weaknesses
- The merits (or drawbacks) of investing in a mutual fund or exchange traded fund that tracks each index
So why would a Fool look at an index? Perhaps most important for individual investors is to select an appropriate index against which to compare the performance of their portfolios. An investor who gains 7% per annum in stocks could feel plenty good absent a measuring stick, but the fact that her returns trailed those of the Standard & Poor's 500 index would paint this performance in a different light.
So how's the market doing today? Choose one of the indexes below to find out:
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