What Is Dow Jones, S&P 500 and NASDAQ? A Malaysian Investor Guide
•By Mahersaham Team
Artikel ini juga tersedia dalam Bahasa Melayu
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You may have heard of Dow Jones, S&P 500 and NASDAQ, but you are not quite sure what these three indices are. Many investors on Bursa Malaysia have heard of them even though they do not invest in the US market.
This is because there is a common belief that Bursa Malaysia's performance is influenced to some extent by global market movements, particularly the United States.
You have probably heard these three indices mentioned on the radio or on the television news. So what exactly are the Dow Jones, S&P 500 and NASDAQ?
Before we understand what Dow Jones, S&P 500 and Nasdaq Composite are, we need to know the difference between a stock exchange and a stock index.
Stock Exchange: A marketplace where companies can be listed for the public to buy and sell shares of ownership in those companies.
Stock Index: A group of selected companies combined to measure the overall performance of a stock market.
A stock exchange is a market where companies can sell and buy their shares. It is also known as a securities market. Essentially, a stock exchange is a place where companies raise capital by selling part of their ownership to the public.
Companies that wish to be listed on a stock exchange must meet certain eligibility requirements. These include financial requirements such as a strong profit track record and sufficient capital. Companies must also ensure they have adequate financial information to share with the public, such as annual reports and financial statements.
In the United States, there are 2 major stock exchanges: the New York Stock Exchange (NYSE) and NASDAQ.
Dow Jones, S&P 500 and Nasdaq Composite are the 3 largest stock indices in the United States. Generally, if a stock index rises, it indicates that the country's economy is growing well and there is confidence in the market. Conversely, if a stock index falls, it suggests uncertainty or problems in the country's economy.
However, each of these indices represents different aspects of market performance.
The Dow Jones, also known as "The Dow," is a stock index comprising 30 of the largest companies in the United States. This stock index was created by Charles Dow and his business partner Edward Jones in 1896, and is named after them. The Dow Jones index is widely used to monitor the overall performance of the US stock market.
Companies selected for inclusion in the Dow Jones index are chosen based on specific criteria. The companies in this index are drawn from both the NYSE and NASDAQ stock exchanges.
Some of the companies in this index include Apple, Coca-Cola, McDonald's, Nike, and others. Companies can be replaced in the index by other companies if there are changes in the selection criteria.
The S&P 500 is a stock index comprising the 500 largest companies in the United States. The S&P 500 index was created by Standard & Poor's in 1957 and is used as a measure of the overall performance of the US stock market.
Companies selected for inclusion in the S&P 500 index are chosen based on specific criteria. The companies in this index are drawn from both the NYSE and NASDAQ stock exchanges.
Many believe the S&P 500 provides a better representation of the US market compared to the Dow Jones. This is because the S&P 500 covers 500 selected companies, as opposed to the Dow Jones which only combines 30 companies.
The Nasdaq Composite Index is a stock index made up of leading technology and information services companies in the United States. This stock index is the largest measure of technology stock market performance in the world and is published by the Nasdaq Stock Market (not NYSE).
The Nasdaq Composite Index consists of more than 3,000 companies listed on the Nasdaq stock exchange. This index covers companies from various sectors, including technology, information services, healthcare, and financial services.
The Nasdaq Composite is often regarded as an indicator of technology stock market performance in the United States. The companies in the Nasdaq index are mostly focused on innovation and technology, and it serves as a platform to measure the success of the world's largest technology companies.
The Dow Jones measures the performance of 30 blue-chip companies across various sectors. The S&P 500 covers the 500 largest companies in the US. The Nasdaq Composite focuses on more than 3,000 companies, most of which are in the technology sector.
The S&P 500 is often considered the best benchmark because it covers 500 companies across various sectors, providing a more comprehensive picture compared to the Dow Jones, which only tracks 30 companies.
Yes, Malaysian investors can invest through ETFs (Exchange Traded Funds) that track these indices. You need to open a foreign stock trading account first to get started.
US stock indices influence global stock markets, including Bursa Malaysia. Understanding the movements of the Dow Jones, S&P 500 and NASDAQ helps investors make better-informed investment decisions.
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