Introduction to the US Stock Market Indices

• S&P 500: Tracks 500 large US companies and represents around 80% of the US stock market.
• DJIA: Tracks 30 large blue-chip US companies and is price-weighted.
• Nasdaq Composite: Tracks around 3,000 companies listed on the Nasdaq exchange, with a strong focus on technology.
• Wilshire 5000: Tracks publicly listed US companies with available pricing data.

These indices can also serve as benchmarks for market performance. You can access index-based exposure through investment products such as mutual funds and exchange-traded funds (ETFs).

A stock market index is a group of stocks used to show how a particular market or market segment is performing. It gives you a quick way to understand whether a group of companies is generally gaining or losing value.

Most indices use a weighting method based on factors such as stock price or market capitalisation. This means some companies can have a greater impact on an index than others.

The US has more than 5,000 stock market indices. Some of the major US stock market indices are:

• S&P 500
• Dow Jones Industrial Average (DJIA)
• Nasdaq Composite
• Wilshire 5000 Total Market Index

You can track these indices to understand broader market movements. You may also find mutual funds or exchange-traded funds (ETFs) that are based on these indices.

These indices can help you compare market movements and understand how different parts of the US equity market are performing.

What does the S&P 500 track?

The S&P 500 tracks the performance of 500 large companies in the US. It is widely used as a benchmark for the US stock market and uses market capitalisation to determine how much influence each company has on the index.

Market capitalisation refers to the total market value of a company's outstanding shares. As a result, companies with higher market values have a greater impact on the S&P 500 than companies with lower market values.

The index represents around 80% of the US stock market, giving you a broad view of overall market performance.

Some major companies included in the S&P 500 are:

• Apple
• Microsoft
• Amazon
• Alphabet (Google)

The securities quoted are for example purposes only and not a recommendation.

How does the Dow Jones Industrial Average (DJIA) work?

The Dow Jones Industrial Average (DJIA) tracks 30 large blue-chip US companies. It is one of the oldest and most recognised stock market indices in the world.

The DJIA was created in 1896 with 12 companies. The number increased to 30 companies in 1928.

Unlike the S&P 500, the DJIA is a price-weighted index. This means companies with higher stock prices have a greater effect on the index value than companies with lower stock prices.

The DJIA represents about 25% of the US stock market and is commonly used to assess the performance of large blue-chip companies.

Some prominent companies included in the index are:

• Apple
• Microsoft
• Coca-Cola
• McDonald’s

The calculation method has also evolved over time to account for events such as stock splits and spin-offs. Its purpose remains to reflect the performance of major US companies.

The securities quoted are for example purposes only and not a recommendation.

What is the Nasdaq Composite?

The Nasdaq Composite tracks around 3,000 companies listed on the Nasdaq exchange. It is a market-capitalisation-weighted index and has a strong focus on technology companies.

The index also includes companies from sectors such as finance and transportation. Some companies outside the US are also included.

The Nasdaq Composite is commonly used as an indicator of technology-sector performance and investor sentiment. To be included, a company must be listed on the Nasdaq stock exchange and meet the relevant eligibility criteria.

Eligible securities can include common stocks, Real Estate Investment Trusts (REITs) and other approved security types.

The securities quoted are for example purposes only and not a recommendation.

What does the Wilshire 5000 Total Market Index track?

The Wilshire 5000 Total Market Index (TMWX) tracks publicly listed US companies for which pricing data is available. It was created in 1974 and is designed to reflect movements across the broader US stock market.

A company must meet these conditions to be included:

• Have its headquarters in the US.
• Be actively traded on US exchanges.
• Have publicly available pricing information.

The Wilshire 5000 is considered a broad measure of US stock market performance because it covers publicly listed companies across the market rather than focusing on one particular sector or company group.

The securities quoted are for example purposes only and not a recommendation.

The S&P 500, DJIA, Nasdaq Composite and Wilshire 5000 are four major US stock market indices. They differ in the companies they track and the way their values are calculated.

The S&P 500 covers 500 large companies, the DJIA tracks 30 blue-chip companies, the Nasdaq Composite covers around 3,000 Nasdaq-listed companies and the Wilshire 5000 provides broader US market coverage. Understanding these differences can help you interpret US stock market movements more clearly.