Newlywed: What is the function of the stock market? Particularly what is the S&P 500, Dow Jones and NASDAQ?
What is the primary function of the stock market? I am having difficulty understanding so laymans terms please! I am writing a paper and I don’t understand the concepts so it is making it very difficult to put into my own words, but I need to know the differences before I progress. Also, does anyone know if there is a web site that will help me understand how to read the S & P 500 that is in Yahoo Finance? Thanks in advance!
Answers and Views:
Answer by jim_casagrande
S&P 500, Dow Jones, and NASDAQ – when you are talking about them together you are talking about them as indices. the NASDAQ is an index of all the companies on the NASDAQ – when MSFT goes up, the NASDAQ index will go up… the S&P 500 is a broad based index of 500 of the top companies in the U.S. The Dow Jones is an index of 30 companies which are supposed to best represent the US economy. The NASDAQ – see above – tech oriented.
the primary function of the stock market is to distribute capital. Companies offer shares through an initial public offering or secondary offerings – capitalism allocates more capital to good companies through the stock market than to bad companies (is the thought). When Microsoft stock goes up some day, it is not getting any money – but, it goes up because people have more positive feelings towards it, so when it does decide to offer more shares to the public, it can do so at a higher price.
Answer by teresathegreatThe stock market, in its most basic form, allows a large number of people to invest in a large number of companies. Each company offers a “share” which gives the buyer a small piece of ownership in the company.
The different indexes, such as the S&P 500, Dow Jones and NASDAQ are not really different stock markets, but are different ways of looking at the same general market. Each index has a list of hundreds or thousands of companies that, in theory, provide an average sample of the entire stock market. The index then calculates how well the stock of each of those companies is doing, and produces an average – that number is the stock index.
Try reading “The Complete Idiot’s Guide to Investing.” Very simple, user-friendly explanations about how investing and the stock market works.
Answer by mathieugpaquetStock market is used to trade part(stocks) of companies and to quote their value.
S&P500 is a selection of 500 companies and S&P500 is reporting their performances.
Dow Jones(Dow Jones Industrial Average) is a selection of 30 very big companies in USA and Dow Jones is reporting their performances.
NASDAQ is an electronical place to exchange parts(stocks) on companies.
Go on investopedia.com .
Best place to learn about stock market.
The stock market is designed to raise money from many investors to build something.
Example:
You want to sell hamburguers and open a new restaurant called McDonald’s but you don’t have $ 10,000.00 USD to open it.
You sell 10 shares for $ 1,000.00 USD each to 10 investors and they will become owners (10% each)
Everyday somebody with right idea and somebody with the wrong idea use somebody else’s money to create something from almost nothing.
Dow Jones Industrial Average, S&P 500 and NASDAQ-100 are indexes.
If the S&P 500 is up then it means the stock price of some of the 500 companies included in the index is up.
If the S&P 500 is down then it means the stock price of some of the 500 companies included in the index is down.
If the index is up and you are holding a Spider then you make money.
If the index is down and you are holding a Spider then you lose money.
The same for all the indexes.
You can invest in those indexes buying ETFs (Exchange Traded Funds)
Their symbols are SPY, QQQQ and DIA.
If you need a more detailed answer then you can drop me a line.
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