A Domestic Stock Index Vs. a World Stock Index
Stock market indexes are a useful way to track and follow the trends of the overall market or selected sectors. Investors use indexes to understand what is happening in the overall stock markets. In the world of global investing it is important to know about indexes that cover both the domestic and world stock markets.
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The Granddaddy
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The Dow Jones Industrial Average is oldest and most widely followed of the U.S. stock indexes. The DJIA has been tracking the U.S. market for more than 110 years. The index tracks a basket of 30 stocks that are considered to be the top blue-chip companies in America.
The New Kid
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In November 2008, Dow Jones launched a new index to track world stock called the Global Dow. The Dow Jones website describes the index this way: "The Global Dow is a 150-stock index of the most innovative, vibrant and influential corporations from around the world." Dow Jones considers this index to be a composite of the top blue-chip companies in the world.
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Broad Domestic
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The Dow indexes cover a limited number of stocks. Professional investors prefer to watch broader market indexes. The S&P 500 covers the 500 largest publicly traded companies in America and the NASDAQ Composite Index includes the 2,800 stocks that trade on the NASDAQ system.
Broad Global
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MSCI Barra is considered to be the leading provider of international and global market indexes. The MSCI World Index includes 1,200 stock from the 23 most industrially advanced companies. The symbol for this index is MXWO. MSCI also provides an index that covers both developed and emerging markets with the symbol MXWD. Bloomberg.com is a good website to check on these world stock indexes.
Direct Investing
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Exchange traded funds, or ETFs, allow investors to invest directly in the different indexes. ETFs hold pools of stocks that mirror the index securities. Among the most popular ETFs are SPY, which tracks the S&P 500, and CWI, which tracks a MSCI global index minus the United States.
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