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Posted bySeven Capitals

Top Stock Indices to Trade

POSTED ON MARCH 18 2024

When it comes to trading in stocks, there is always the risk of losing your money while you bet on the growth of a single stock price. In this case, investing in index funds based on indices can be a stable and more reliable opportunity. For example, you can trade on indices such as IBEX35, DAX 40, Nasdaq 100, and E-mini S&P 500 with Seven Capitals. In this blog, let’s learn what indices are, which are some of the top indices around the globe, and how Seven Capitals, a leading brokerage firm in Dubai, can help you with indices trading. 

What are Indices? 

Indices are a basket of stocks and indices give traders the opportunity to buy and sell index funds based on these indices. The value of an index is measured on the basis of the collective performance of these stocks in the basket. The stocks selected in an index and its value calculated can be based on various criteria such as market capitalisation weighted, price weighted, equal weighted, and modified capitalisation weighted. The stock selection can be based on the top stocks, by market cap or stock value, of a particular sector such as Tech, Energy, Banks, etc. The number of stocks considered could range from 30, 50, 100, 500, 1000 or even more. 

Indices can also be based on the top performers among mid cap companies, small cap companies, etc. S&P 500, Dow Jones, Nasdaq composite, and FTSE 100 are some of the most popular indexes based on various stock exchanges across the world. But, an investor cannot directly put their money in an index, instead they should choose an index fund which closely mimics the performance of an index. For example, Vanguard S&P 500 ETF is an index fund that follows the popular S&P 500 index. 

Index funds are normally traded as ETFs or mutual funds. Also, some traders depend on portfolio or fund managers, who individually pick the stocks in an index and divide the funds to invest separately in those stocks. They collectively keep these stocks as holdings, so that the risks can be spread and neutralised, and the overall performance of the portfolio can be tracked by taking a look at the index based on which the portfolio is designed. This method of investing is known as indexing. 

List of Top Stock Indices

There are many popular stock exchanges around the world – London stock exchange, New York stock exchange, Tokyo stock exchange, Nasdaq, Shanghai stock exchange, Toronto stock exchange, Hong Kong stock exchange, National stock exchange of India, etc. Each of these stock exchanges have indices based on baskets of stocks selected using various criteria such as market cap, sector, performance, etc. Let’s take a look at some of the top indices around the world, issued by the popular stock exchanges from across the globe: 

  • Dow Jones Industrial Average is a major index from the US market, which covers 30 huge blue-chip US companies.
  • Russell 2000 index is another index from the US market, covering 2000 smallest stocks from the small-cap sector.
  • Nikkei 225 is an indicator of the Japanese economy which tracks the performance of the stocks of 225 major companies listed in the Tokyo Stock Exchange.
  • CAC 40 measures the collective performance of 40 largest companies listed in the Euronext Paris stock exchange. The value of this index can be a clear indicator of the overall performance of the French economy.
  • S&P 500 index, also known as Standard & Poor’s 500 index, tracks the performance of 500 publicly traded companies in the US market.
  • Nasdaq composite index tracks all the stocks listed in the Nasdaq exchange, consisting of more than 2500 stocks, majorly from the tech sector.
  • FTSE 100 index is based on the performance of the stocks of 100 largest companies listed in the London Stock Exchange.
  • Nifty 50 calculates the weighted average of 50 largest Indian companies listed on the National Stock Exchange in India.
  • DAX 30 covers 30 major companies in the German market.
  • Hang Seng Index tracks the performance of 50 largest companies listed in the Hong Kong stock exchange.

The values of the above indices can be high-time indicators of the performance of the economy of that particular country, or of a particular sector in that nation. Apart from the above, there are many other stock indices based on various stock exchanges around the world. By getting an understanding on each, you can find the right index funds based on the indices, and invest in the same as well. 

Why Choose Seven Capitals for Index Trading?

Indices trading can be a great choice when it comes to diversifying your investment portfolio. Seven Capitals can help you trade index funds based on various indices from around the globe, such as DAX40, IBEX 35, Nasdaq 100, and E-mini S&P 500. Also, we offer trading opportunities on multiple financial assets such as crypto, forex, precious metals like gold and silver, and energies like natural gas, Brent oil, and crude oil. With our state-of-the-art MetaTrader 5 trading platform, competitive spreads and charges, 24/7 customer support, and educational materials like blogs and articles, you can always stay on the edge of your trading game. Join Seven Capitals today to take full advantage of our index trading opportunities. 

Conclusion 

Index trading helps an investor to reduce the risks involved in trading on individual stocks. By investing in an individual stock, the trader is betting high on the performance of that single stock. But, by selecting an index fund which also gives weightage to the company stock he prefers, along with several other companies in the same sector, he or she can maintain an equilibrium. Additionally, many major indices across the globe have given positive annual returns of minimum 10% in the last many decades. Those who are not interested or do not have the time to do detailed fundamental analysis of every other stock he or she wants to invest in, index funds are a great way to invest your hard-earned money.
 

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