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Wednesday, September 28, 2022

A Guide to the Biggest American Investment Indices


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No matter where in the world you’re located, there’s the option to invest around the globe. Just because you live in one country, doesn’t mean you can’t cast your eyes overseas to take advantage of the best opportunities.

This is a lesson savvy investors understand and is one of the major reasons that so many choose American indices. In this article, we’ll take a look at the most popular of these, along with their contents and how to trade them.

Read on for a brief rundown of what you need to know before focusing your investing efforts on the US.

America’s biggest indices

Source: Pixabay

Before trading the American markets, it’s important to familiarise yourself with the three biggest indices. These are:

The Dow Jones (DJI)

Marked by the trading symbol DJI, the Dow Jones Industrial Average is a price-weighted stock market index that includes 30 of America’s most prominent companies. As one of the oldest and most widely followed equity indices, it’s traded by individuals around the world – including many in Thailand.

Its name comes from the two men who created it back in 1896 – Wall Street Journal editor Charles Dow and statistician Edward Jones. Among the companies listed, those that deliver the highest dividend yields are known as the “Dogs of the Dow”. Businesses featured include Apple, American Express, and Boeing.

The Nasdaq-100 (NDX)

The Nasdaq-100 is another stock market index, this time consisting of 102 equity securities. It differs from the Dow Jones in that it uses a modern weighting system based on capitalization rather than price. No financial companies are included on its list.

It’s not only American businesses that are encompassed in the Nasdaq-100. Since January 1998, overseas entities have also been eligible. Businesses featured in the index include Adobe, Amazon, and eBay.

The S&P 500 (SPX)

Founded in 1957, the S&P 500 has been around for over five decades. This stock market index includes 500 of the largest companies listed on stock exchanges in the US and is followed by investors from around the world. At the close of 2020, investment in assets tied to it topped $4.6 trillion.

Like the Nasdaq-100, the SPX uses a capitalization-weighted system. Companies listed include Apple, Microsoft, and Amazon, with the 10 largest accounting for over a quarter of the index’s market value. It’s often recommended to investors who are looking to play the long game.

A global following

Guide Biggest American Investment Indices

Source: Pixabay

As we mentioned earlier, these indices are not only traded by those in America – they have a following the world over. There are lots of ways to invest in them, from purchasing stocks to buying contracts for difference through online brokers. The latter allows traders to speculate on price movements without buying the underlying asset. This means they can profit from movements up and down, making them an ideal addition to portfolios in need of diversifying.

When it comes to investing, there are so many options out there. The possibilities are limitless, with no cap on what or where an individual can invest. It’s this that makes trading the markets such an appealing prospect to so many.

Will any of these major American indices be making an appearance in your portfolio?


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