The stock market has been doing well recently, and this is helping the economy. But with so many stocks available, how can we get a fix on what stocks in general are doing? N.C. State University economist Mike Walden answers.
“Well, this is where stock market indices come in. Each index will take a wide … combination of stocks. They will average them together. Now the average is a weighted average based on the relative importance of the stock. And so you can come up with one number that you can track that gives you an overall indication of the broad stock market — obviously not individual stocks but the broad stock market. … Probably the most famous is the Dow Jones Industrial Average. Another widely followed one is the S&P or Standard & Poor’s 500 (and) the Russell 2,000.
“Now we also have indices for particular segments of the stock markets such as the NASDAQ index, which follows tech stocks. Now your individual stocks that you have in your portfolio may not perform exactly the way these indices do, but … you can track these indices on a day-to-day basis. All the financial programs publish them hourly. And it gives you an idea of what overall the stock market, in this case, or various investment markets are doing.”