Stock Market Quotes – Financial Market News
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Investors want to know how their investments are performing compared to a market index. There are two stock market indices that are well known to most investors. The Dow Jones Industrial Average and the Standard & Poor’s 500. Many investors compare the performance of their securities and investment portfolios to the performance of these two stock market indices.
The Dow Jones Industrial Average (the Dow), is an index consisting of 30 of the largest and most widely held stocks from various industries. Most media outlets frequently reference the performance of the Dow when reporting on financial market news even though this market index is comprised of a very small representation of the overall stock market.
The Standard & Poor’s 500 is a stock market index consisting of the stocks of 500 large actively traded American companies. This is the second most frequently quoted market index referenced in reporting about the latest financial news.
Most diversified portfolios are invested in securities from many different asset classes. Measuring the performance of an entire portfolio against the performance of one market index, such as the Dow or the Standard & Poor’s 500, is not the proper way to measure the performance of a diversified investment portfolio.
Instead, you should measure the performance of your investments in each asset class against the appropriate indices for each asset class and then compare the overall performance of your portfolio against a weighted average index or a performance measure that is representative of the actual components of the portfolio.
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