Why the Dow Jones is important :The major global indices explained.


An index is a financial instrument that is used to measure change in a certain segment or aspect of the market. There a certain global indices that are often referenced by investors namely  the Dow Jones Industrial Average , NASDAQ, the S & P 500 and for the purpose of the South African market the JSE Top 40 Index .These indices are referenced and used as an indicator to see if the market is down or up, this is because indices show what changes have taken place in the market. In this article we will be discussing what these respective indices track and how they can be interpreted.

How indices are read : 

Before we explore what each index tracks we should discuss how each index are read. Indices are measured in points and in an currency. Therefore when the market opens the index will measure of certain points. For example the Dow Jones may be at 14 000 points and when the market closes it may close at 14 050 points. This increase will be recored in a percentage as a 0.36% increase in the Dow Jones. Without being to technical or complicated, all you need to understand is that the points are calculated on the weighted average market capitalisation of the stocks that are being tracked by the respective index. Therefore each index can range drastically in how many points it consists of.

Dow Jones Industrial Average :

The Dow Jones Industrial Average is a stock market index that tracks the performance of the 30 largest companies in the United States in America. This index is used as a benchmark by many investors to assess the market as well as compare the performance of their own investment portfolios. If the Dow Jones index drops in points, this is an indication that the market is down and if the index is up it is an indication that the market is down. The idea behind using an index is not look at its day to day performance , but rather to look at its overall trend, so you can use this as a metric to measure the overall performance of the market.

NASDAQ Composite Index:

The NASDAQ Composite Index also like the Dow is a stock market index , that tracks a certain segment of the market. The NASDAQ Composite Index focuses on information technology companies which are based in the United States. It is a good index to track companies that operate in the tech space such as Apple, Google and Microsoft. These companies are also included in the Dow index tracking. 

S & P 500

The S & P 500 is also similar to the Dow and the NASDAQ in that it is a stock market index which tracks a certain segment of the market. The S & P 500 tracks the 500 largest companies in the United States. This index gives a broad gauge of the market and used as bench mark usually to assess the overall performance of the whole market. In comparison to the Dow , the S  & P covers a larger range of companies generates a broader perspective  of the market.

JSE Top 40 

This index is more specific to the South African market ,unlike the other three indices mentioned above it does not relate to companies established in the United States. This index tracks the top 40 South African companies that are listed on the JSE. This market is perhaps the most important of the four discussed in this article because it allows us to compare the performance of the  South African market to the performance of other markets. In addition to this the index provides an indication of the market environment how to position your investment portfolio accordingly.

The nature of indices is comparative. You are truly only able to reach consensus and confirmation of the market by evaluating different indices in comparison to each other. For example if you have the Dow and S & P 500 both indicating and uptrend in the market , that is a stronger conformation that the market is bullish. An index can be used as an indication of the market condition, but they are not a guarantee of the market environment. A market index still has its limitations as a it only gauges a certain segment of the market, and therefore can never be a true representative of the whole market, and that should also be taken into consideration.


  1. We are a bunch of volunteers and starting a new scheme iin our
    community. Your wweb site offered us with
    useful ihfo to work on. You have done aan impressive activjty
    and our entire community might be thankful tto you.

  2. You’re so interesting! I don’t think I’ve read through anything like this before.
    So nice to find somebody with a few original
    thoughts on this issue. Seriously.. many thanks for starting thijs up.
    This web site is one thing that is needed on the internet, someone with some originality!

  3. Wow that was strange. I just wrote an really long comment buut after
    I clicked submit my comment didn’t appear. Grrrr… well
    I’m not writing all that over again. Anyways, just wanted to say excellent blog!

  4. Hi, Neat post. There’s a problem togeether with your webite in internet explorer, may check this…
    IE still is thee marketplace chief and a big portion oof other people wll
    omit your great writing due too this problem.

  5. Hey there! I’ve been following your website for a while now and finally got
    the bravery too go ahead and give you a shout out from Dallas Tx!
    Just wanted to tell you keep up the fantastic work!

  6. Great – I should definitely pronounce, impressed wit your site.
    I had no trouble navigating through all tabs as well as related info
    ended up being truly simple to do to access. I recently
    found what I hokped for before you know it at all. Reasonagly unusual.
    Is likely to appreciate it for those who add forums or anything, web site theme .
    a tones way for your client to communicate. Nice task.

  7. Whats up very cool blog!! Guy .. Beawutiful
    .. Wonderful .. I’ll bookmark your website and twke the feeds also…I’m
    satisfied too find numerous useful info righyt here within the
    post, we’d like develop more strategies oon this regard, thank
    you for sharing.

  8. Hello, There’s no doubt that your website may be having browser compatibility issues.

    Whenever I look at your web site iin Safari, it
    looks fine but when opening in I.E., it has some overlapping issues.
    I simply wanted to provide you with a quick heads up!
    Aside from that, fantastic blog!

  9. Thank you for some other wonderful article. The place else may anyone get that type of information inn
    such a perfect means of writing? I have a presntation next
    week, and I am at the search for such info.

  10. Just desirre too ssay your article is as astonishing.
    The clarity in your post is just nice and i can aswume you’re
    an expert on this subject. Fine with yyour permission let me to grab your feed to keep updated with forthcoming post.
    Thanks a million and please carry on the rewarding work.

  11. Hello There. I found you blog using msn. This is a
    very well written article. I will be sute to bookmark it and comee back to
    read more of your useful information. Thanks
    for the post. I’ll definitely return.

  12. Definitely believe that whijch you said. Your favorite justification appeared to be at the internet the easiest thing to understand
    of. I say to you, I certainly get annoyed whilst people consider concerns tyat they just doo not realize about.
    You managed to hit the nail upon the highest as smartly as definned out the
    whole thing without having side-effects , other people can take a signal.
    Will likely be back to get more. Thank you

  13. It’s a shyame you don’t have a donate button! I’d definitely donate to this
    superb blog! I suppose for now i’ll settlee for bookmarking and adding your RSS feed to my
    Google account. I look forward to brand new updates and will talk about this website with my Facebook group.
    Chat soon!

  14. I don’t even know how I finished up here, however I assumed this post was oce great.
    I don’t realize who you’re however definitely you are going to a well-known blogger if you are not already.

  15. We would like to thank you yet again ffor tthe beautiful ideas
    you offered Jess when preparing her own post-graduate research plus, most importantly, for prlviding each of the ideas within a blog post.
    Provided we had known of your blog a year ago, we will have been rescued from the uselpess measures we were choosing.
    Thank you veery much.

  16. Write more, thats all I have to say. Literally, iit seems as though you relied on the video to make your point.
    You definitely know what youre talking about,
    why throow away your intelligence on just posting
    videos to yur blog when you could be giving us something enlightening tto read?

  17. This is very interesting, You arre an excessively
    professional blogger. I have joinned your rss
    feed annd look ahead to in quest of extra of yoiur grezt post.
    Additionally, I’ve shared your site in my social networks!

  18. I�m impressed, I must say. Seldom do I
    come across a blog that�s equally educative
    and amusing, and let me tell you, you’ve hit tthe nail on the
    head. Thee issue is something that not enough folks are speaking intelligently about.

    I am very happy that I came across this during my search for something
    regawrding this.

  19. Can I jst say what a comfort to discover someone that really understands what they are talking about on the internet.
    Yoou certainly know how to bring an issue to light and make it important.
    More and more people really neeed to look at this and
    understand this side of the story. I was surprised you
    are not more popular since you certainly have the gift.

  20. Nice post. I was checking constantly this blog and I’m
    impressed! Extremely helpful information specifically the last part 🙂 I care for such
    information a lot. I was seeking this particular
    information for a long time. Thank you and good luck.

  21. Heyy there, You’ve performed an incredible job. I will certainly digg
    it and personally suggest to my friends. I am sure they’ll be benefitted from this website.

  22. Thanks on your marvelous posting! I quite enjoyed
    reading it, you may bbe a great author. I will remember to bookmark your blog and may come
    back ater in life. I want to encourage you to definitely continue your great job, have a nice day!

  23. Greate article. Keep posting such kind of info on your site.
    Im really impressed by your site.
    Hello there, You have performed an excellent job. I will definitely digg it and in my opinion suggest to my friends.
    I am confident they will be benefited from this site.

  24. Thank you for another fantastic article. Where else could anybody get that kind of info in such a perfect approach of writing? I have a presentation subsequent week, and I’m on the search for such info.

  25. Much obliged to you for some other great article. What other place may just anybody get that kind of data in such a perfect methods for composing?
    I’ve an introduction one week from now, and I am at the quest for such data.


Please enter your comment!
Please enter your name here