What is an Index?

Potential investors who want to invest in indices in Forex markets often ask the questions of "what is an index", "what are the main indices" and "why invest in indices".

To define the index, the indicators that measure the proportional change in the values/prices, costs and sales performances of investment instruments traded in the stock exchange are called indexes.

The most active stock market indices in terms of trading volume in the world are Dow Jones, Nasdaq, S&P500, Ftse and Xetra Dax. In Turkey, there are more than one index under Borsa Istanbul. Types of indexes with the highest number of transactions in Borsa Istanbul; BIST 100 index, BIST 30 index and BIST Banking index.

What are the Important Indices?

As an example for local markets, we can show the BIST 100 index, which consists of the first 100 stocks with the highest trading volume traded in Borsa Istanbul. Over 50 indices such as BSIT 50, BIST 30, BIST service, BIST Banking are traded within Borsa Istanbul. There are also DIBS indices as bond and bill indices.

For the main indices traded in global markets, we can give examples such as DOW JONES 30, FTSE 100, DAX 40, S&P 500, CAC 40, NASDAQ, TecDax, Merval, DJ Euro Stoxx 50, XetraDax, NYSE, Hang Seng, BSE 30, Bovespa.

Let's break down some of the major indices followed by investors in the world markets.

FTSE 100 index
The FTSE 100 Index consists of the shares of the top 100 companies with the highest volume traded on the London Stock Exchange, the world's fourth largest stock exchange.

New York Stock Exchange Indices
There are more than one popular index from the New York Stock Exchange (NYSE), one of the largest stock exchanges in the world. Some of them can be listed as follows;

Dow Jones Index
It consists of the weighted average of 30 stocks with the highest market capitalization, traded on the New York Stock Exchange and the Nasdaq.
The Nasdaq Index includes more than 3000 domestic and international securities traded on the Nasdaq Exchange.

S&P 500 Index
It consists of the stocks of 500 large-capital companies, all of which are also in the USA.

Nikkei 225 Index
The Nikkei 225 index, which consists of 225 shares with the highest trading volume traded on the Tokyo Stock Exchange, one of the largest stock exchanges in Asia, is among the favorite investment instruments of investors.
        
How is the Index Calculated?
Stock market indices are calculated according to the weights of the stocks in them. E.g; There are 30 most active stocks in the Dow Jones 30 index. Some of these shares are; Goldman Sachs, Microsoft, Pfizer, et al. The stocks in the index are revised periodically, removal from the index or addition to the index is performed.