Stock market index

A stock market index provides benchmark for mutual fund research. The most well known stock market index is the Dow Jones Industrial Average. S&P 500 stock market index is one of the most useful stock market indexes. The NASDAQ composite stock market index is also a major stock market index. Below are explanations of stock market indexes.

The Dow Jones Industrial Average stock market index (DJIA)

Click here to read about the Dow Jones Industrial Average (DJIA).

The Standard and Poor's 500 ( S&P 500 ) stock market index

The Standard and Poor's 500 or S&P 500 for short is the stock market index most mutual fund managers use to measure their mutual fund performance. Therefore, when you do mutual fund research, you might want to pay particular attention to the S&P 500 stock market index.

Within the S&P 500 are over four hundred industrial, forty utility, and twenty transportation stocks. The S&P 500 index includes stocks that represent over 75% of the stock market value of all those on the New York Stock Exchange (NYSE).

The NASDAQ Composite stock market index

The NASDAQ Composite stock market index is a computerized price reporting system that covers more than two thousand over the counter (OTC) stocks. The NASDAQ includes industrial, bank, insurance, finance, transportation, and utility stocks.

Which stock market index to use?

If you measure the mutual fund performance against a stock market index in your mutual fund research, be sure to use the appropriate stock market index. For example, for mutual funds holding stocks that are listed on the New York Stock Exchange (NYSE) and NASDAQ, use the S&P 500 to measure those mutual fund performance.

Use the NASDAQ Composite for mutual funds that invest primarily in over the counter (OTC) stocks. Use the Dow Jones Industrial Average (DJIA) when a mutual fund invests mainly in stocks on the Dow Jones.

In your mutual fund research, when you compare mutual fund performance to a stock market index, be sure to consider reinvestment of dividends and capital gains that the mutual fund pays.