How to make sense of Stock Market News

When you hear a news anchor on TV to talk about new developments in the stock market, which usually include words such as Dow Jones or the NASDAQ, FTSE or in their relationship. What do these phrases and abbreviations mean?

These terms refer to trade in a society where it is reported. A company must be traded for its shares to be traded publicly. After the company's shares are released to the public in an Initial Public Offering (IPO), are then available to the public to be traded on exchanges. New York Stock Exchange is probably the largest market share in the U.S., while the FTSE holds that honor for Europe.

When people ask "how the market is doing What are the latest developments?" they intend to ask how the stock market index is performing. Market indexes are the key indicators for the performance of any market share.

An index, in its simplest, is the cumulative stock prices of companies operating divided by the number of shares traded for an average indicator of stock market performance. Examples of popular market indexes in the United States are the Dow Jones Industrial Average, Nasdaq Composite and the SandP 500.

The Dow Jones lists the securities of 30 companies, ranging from food giant McDonalds to bankers like Citigroup to entertainment companies like Disney.

The Nasdaq Composite registered 5,000 companies from different sectors, but its mainly focused on technology stocks.

The SandP 500 measures the stocks of 500 of the largest public companies. They are categorized as the largest in terms of their market value. The SandP 500 is actually considered a pretty solid indicator of the overall performance of the stock market because they cover companies from a broad base of industries.

Indices are the basis of the market. New investors are often advised to invest in these "blue chip" stocks that are traded on one of three scholarships mentioned above because they offer great stability and the possibility of a regular dividend income over time.

Some of the most popular on the international market indices include the FTSE (UK), Nikkei (Japan), the Hang Sang (Hong Kong), DAX (Germany), the ASX (Australia) and the CAC (France).

Since the indices give a snapshot of the great stock market, are used as indicators to evaluate the performance of the market. Novice investors who not only invest in individual securities may also invest in mutual funds, stocks that are representative of a certain stock market index. Mutual funds are marginally safer investments, because they combine actions that perform much the same way, and is professionally managed.

You now have a better understanding of the stock market, a new vision of the index and a take on the issues that informed investors beginners. This knowledge will help you make sense of financial terminology heard every day on TV and read in the papers so you too can become a savvy investor.