What exactly does it mean when the papers/news say.?
what are the points? is it simply an average? i.e taking into account whether the business have gone up or down in the day? so in my example would it mean that on avergae any chosen company closed 20.7 pence lower than when it opened?
or am i totally missing the point? please help?
Answer:
The point is this:
If I own stock, I probably don't own just one stock, but several. And when I'm wondering about my "stocks", I don't want to go check the price every one individually and take all day averaging and adding them up to see if I'm making money.
Wouldn't it be nice if there were some "market guage" that I could quickly check several times a day, or at a glance, to see whether my portfolio is either unaffected or I'm losing everything and I should take action?
That is what a market index is for. That is it's purpose, just to get an idea of the overall market. You cannot equate this "average" price to currency.
When the FTSE 100 started out, they took 100 stocks and added up the price and divided by 100. That became the FTSE 100 Index. It's a fairly broad measure of the market.
So if the FTSE is up 20 pts or less, you know your stocks aren't doing much, and there isn't much point in checking the individual prices of each of your shares. But if the FTSE is up or down 50 pts or 100 pts, you might want to buy or sell something or otherwise take advantage of that swing.
The FTSE index becomes a proxy for "the market" and thus for what all stocks are doing. It also gives us an easy measure of percentage performance at a glance. It's as simple as that.
no.it means they lost 3% compared to the day before.
Stock markets have a point system based on several factors. I am nto sure about the British market but my guess would be FTSE 100 would be the one that comprises of 100 companies selected on the basis of their performance. In the U.S. there are the blue chip stocks. FTSE 250 should comprise of 250 selected companies. The average of how they fared that day is the result you see. In your case, it does not mean that an average company lost 20.7 pence. Points are not currency but an indicator. It is based against the previous day.
It is kind of like taking a survey. You take a sampling which more or less reflects the entire population.
i am agree with the answer above /|\
First u need to know what the index comprises of.
Why we need an index for the market ??
In general, if you ask how indian or the US markets are performing and if you do not have an index its very hard to answer.
What is an index?
The index constitute of heavy weight or the blue chip companies from various sectors. And these stocks are given weightage (points)according to their market cap.
So if an index say Nasdaq constitutes of 5 stocks from 5 sectors and on a particular day 3 of the stocks have gone up by 3 pts each and the remaining 2 stocks have gone done by 3 pts each, the end of day index will show you +3. ie the markets have gone up by 3 pts.
Will index hold the outlook for every stock ??
No, it does not. it holds the outlook for the market as a whole and not for every stock. On a part day, the index mite have gone down by 20 pts but a stock X which is not an index stock can go up by 20 pts.
PS : in general over a period of time every stock tends to follow the index.
I hope i have been clear!!
The DJ average points is add up the price of all its components (30 of them).
Hi, i know what your question is.
i suggest a great site with plenty of Issues related to your Investing and everything around it. it also provide clear and accurate answer to many common questions.
I am sure that your Investing will benefit greatly from this website.
http://investing.sitesled.com/
Good Luck and Best Wishes!
The answers post by the user, for information only, BAnswer.com does not guarantee the right.
Other Questions and Answers: