Indices Stock
When you watch the financial news you hear things like the DOW is up 200 points today or the NASDAQ is down 30 points or the S&P 500 is up 12 points. These various entities are collections of stocks that represent different markets or sectors. In the past you would have had to buy all the stocks in the collection in order to mimic what was being reported but now you can buy an indices stock or as it is often called an index fund (mutual fund) or ETF (electronic traded fund).
These indices stocks are companies that hold the same collection of stocks as the index and then for a small management fee allow you to purchase shares of the collection without all the hassle of balancing the fund yourself. Another advantage is a much smaller price of entry than buying one of each S&P 500 stock or even the DOW 30 Shares. Your only real task once you’ve determined you wish to diversify your portfolio with one of the indices stocks is to verify that the management fee is worth not purchasing each of the shares yourself and balancing the fund as it changes. Odds are if you are a new investor their management fee is much lower than the commission fees for buying and selling stocks.
Here are a few of the common stock indices:
Stock DOW Jones: The Diamonds Trust, Series 1 (DIA) often called the diamonds, is one ETF which allows you to track the DOW stocks.
Stock S&P 500: The SPDR Trust, Series 1 (SPY) often called the Spiders, is an ETF that lets you track the S&P 500.
Stock NASDAQ: The Powershares QQQ Trust, Series 1 (QQQQ), usually called “the Qs” allows an investor to buy the NASDAQ 100.
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