Investing in Philippines: Investing word of the day: Stock Market Index

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Thursday, August 19, 2010

Investing word of the day: Stock Market Index


source: www.pse.com.ph

Many of you may have read in the business section of newspapers or maybe in the business news like CNBC, Bloomberg, Reuters  and others about stock market  index. In the Philippines the main index is the PSEi, so what does stock market index or "index" mean in the stock market?

I searched the PSE website and I got this: a medium used to denote trends in securities market. 

Unsatisfied with that, because it seems to deep and hard to understand, I relied to our friendly Wikipedia.com which gives this definition: A stock market index is a method of measuring a section of the stock market.

And then I stumbled into a great definition from www.abcsofinvesting.net which says:

An stock market index (or just “index) is a number that measures the relative value of a group of stocks. As the stocks in this group change value, the index also changes value. If an index goes up by 1% then that means the total value of the securities which make up the index have gone up by 1% in value.

Also got this video from Youtube.com
 




In layman's term: An index is a grouping of stocks that reflects a section or a part of the entire market. It is a measure the general investing public refer to as an indicator of the economy or the trend in stock market.

If you are trading stocks online or doing some stock index trading it would be great to have some form or tool that you use as your guide. As I have mentioned in my previous post, the general investing world has looked at the Dow as an indicator. In the Philippines we usually follow the Dow's movement. The PSEi mostly follows the Dow. So I assume that the investing public here in the Philippines use the Dow as their guide in investing. The PSEi has also been used by investors as an indicator on how healthy our economy is. Recently the PSEi has gone a rollercoaster ride and now as of this writing it is on its upward trend again.

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Chitika