Major Market Indexes List
A Complete List of Indexes for Investing in Stocks and Bonds
Whether you are looking for index mutual funds, Exchange Traded Funds (ETFs), or you want to know which index to use as a benchmark for your investments or portfolio, this list of major market indexes will be useful for you.
Keep in mind that an index is not an investment; it's simply a measure of performance for a particular set of securities. In different words, an index, as it pertains to investing, is a representative sampling of a given set of securities. Index funds will invest in the same securities as the underlying benchmark index.
Here are the most common indexes (or indices) used for investing today:
The Dow Jones Industrial Average is a stock index that represents the average price movement of 30 large companies from various industries in the United States. Named after Charles Dow and Edward Jones, the famous stock benchmark is also known as Dow Jones, the Dow 30 or as it is most often called, "the Dow."
Serious minded investors, such as technical traders and institutional investors, do not give as much reverence to the Dow Jones as mainstream media. Perhaps because of its relatively recognizable name, evening newscasts and wide read print media can simply provide a headline, such as "The Dow Hit a New Record High Today" and information consumers will know what that means.
Known as "the S&P 500" or simply "the market," the Standard & Poor's 500 Index is the most commonly used benchmark for the large-cap segment of the US domestic stock market. The index represents approximately 500 US-based companies and covers approximately 75% of the US equity market.
Many investors use one of the best S&P 500 Index funds as a core holding in a portfolio of mutual funds or ETFs.
The NASDAQ or National Association of Securities Dealers Automated Quotations System is a stock exchange like the better-known New York Stock Exchange (NYSE) on Wall Street. The first electronic stock market, and the successor to the over-the-counter (OTC) system of trading, the NASDAQ differs from the NYSE in that it is a fully automated network. The NASDAQ is also recognized for its high relative concentration of technology sector stocks.
Along with the Dow and the S&P 500, the NASDAQ is one of the most watched stock indexes. The NASDAQ's main index is the NASDAQ Composite, which consists of over 3,000 stocks but the best known index may be the NASDAQ 100. Stocks traded on the NASDAQ typically have ticker symbols with 4 characters, such as MSFT for Microsoft or TWTR for Twitter.
Often called "the total stock market index," The Wilshire 5000 is the broadest stock market index -- a sampling of more than 5000 stocks representing a range of market capitalization (i.e. large-cap, mid-cap and small-cap).
It is important for investors to note that the Wilshire 5000 is market-cap weighted, which means that larger companies (those with larger capitalization) will represent a larger portion (be among the top holdings) by percentage than the smaller companies. In other words, investors may feel that they have a diversified holding because of its exposure to so many stocks of different capitalization. However, the high exposure to large-cap stocks is so significant that the performance will have a high correlation (be similar to) most large-cap stock funds.
For this reason, many investors choose to use an S&P 500 index fund to represent large-cap stocks and a separate index, such as the Russell 2000, to represent small-cap stocks within their portfolio.
The Russell 3000 Index
Not to be confused with the Russell 2000 (see below), the Russell 3000 is a stock index, representing approximately 3000 stocks, that measures performance of the largest US companies. The Russell 3000 Index is often called a broad market index because it represents approximately 98% of the investable U.S. equity market.
Mutual funds and ETFs that invest in a way that mimic the Russell 3000 Index can be good choices in building a portfolio. However, for purposes of diversification, investors should note that the Russell 3000 should be considered the large-cap portion of the portfolio and therefore should still have representation from other fund types or categories, such as small-cap stock, foreign stock, and fixed income (bonds) within the portfolio.
The Russell 2000 Index
The Russell 2000 is an index that represents the small-cap stock portion of the equity investment universe. As the name implies, the index covers approximately 2000 of the smallest companies, based on market capitalization.
According to the creator of the Russell 2000 Index, Russell Investments, the index "is constructed to provide a comprehensive and unbiased small-cap barometer and is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set." This makes Russell 2000 Index funds and ETFs a good compliment to a large-cap index, such as the S&P 500, for building a portfolio of funds.
The S&P Midcap 400, also known as the S&P 400, is an index comprised of U.S. stocks in the middle capitalization range. According Standard & Poor's website, "the S&P MidCap 400® provides investors with a benchmark for mid-sized companies. The index covers over 7% of the U.S. equity market, and seeks to remain an accurate measure of mid-sized companies, reflecting the risk and return characteristics of the broader mid-cap universe on an on-going basis."
According to Morningstar, "middle capitalization range" is from $200 million to $5 billion market value. This may sound large but companies are not widely known until they reach the multi-billion mark. For reference and comparison, mid-cap stocks can include some companies you may have heard of, such as Whole Foods Market, whereas a large-cap company, such as Wal-Mart, is much larger in capitalization ($230 billion in 2012). Small-capitalization companies are not widely known names.
MSCI is an acronym for Morgan Stanley Capital Investments. There are several MSCI indices, which are widely used as benchmarks for foreign stock portfolio performance.
The Major MSCI Indexes include:
- MSCI ACWI: ACWI is an acronym that means All Country World Index. The MSCI ACWI covers over 9,000 securities across large, mid and small cap size segments and across style and sector segments in 45 Developed and Emerging Markets.
- MSCI EAFE: Widely accepted as the international markets benchmark, EAFE is an acronym that means Europe, Australasia, and Far East. The MSCI EAFE Index is an aggregate of 21 individual country indexes that collectively represent many of the major markets of the world.
- MSCI World: This index covers over 1,600 securities from developed countries all over the world, hence the name. This index also covers the United States so for US investors, the MSCI World is not a true foreign stock index because it includes many US domestic stocks.
- MSCI Acronym Suffixes: If you see the acronym "IL" added to the index name, it means that the index is listed in local currency. If you see "DM" it meas Developed Markets and if you see "EM" it means Emerging Markets.
The Barclays Capital Aggregate Bond Index, also known as "the BarCap Aggregate," is a broad bond index covering most U.S. traded bonds and some foreign bonds traded in the U.S. The BarCap Aggregate was once known as the Lehman Brothers Aggregate Bond Index. Investors can capture the performance of the overall bond market by investing in a total bond market index fund.
Disclaimer: The information on this site is provided for discussion purposes only, and should not be misconstrued as investment advice. Under no circumstances does this information represent a recommendation to buy or sell securities.