Whether you are just getting started with investing or you are an avowed veteran, it is important to be familiar with the major stock market indexes and understand how they work.

Knowing how to use the Dow Jones Index, the S&P 500 Index, and the Nasdaq 100 Index can help you make smarter financial decisions that will work in the long run.

Dow Jones

Founded in 1896, the Dow Jones is one of the oldest and most watched stock market indexes in the world.

Originally it consisted of twelve companies, but it expanded to 30 in 1928. It is a price-weighted index. This means that a higher price for a stock will have a bigger impact on the value of the index.

The index is named after Edward Jones, who was the co-founder of The Wall Street Journal. He was also the inventor of the first Dow Jones.

The index is the sum of the share prices of the 12 companies listed. However, this isn't the only way that the index calculates its value. It also considers stock spins and dividends to account for the one point move in the index.

The Dow Jones Industrial Average is a price-weighted index that represents large-cap US stocks. This means that a large percentage of the index is made up of companies with a market cap of over $5 billion. It is considered a barometer of the US economy, as well as the stock market.

The index is maintained by S&P Dow Jones Indices, which is an index maintenance company owned by S&P Global. The index is also managed by an ETF, or exchange-traded fund.

The ETF is an investment vehicle that offers exposure to the entire index. It is also leveraged, which means that traders can make short or long trades, and the spreads can be larger.

The Dow Jones is considered to be a microcosm of the global financial market. Its value can be affected by macroeconomic events, news articles, and presidential elections.

There are also technical indicators, such as Bollinger Bands and the Stochastic Oscillator, that can help confirm the current trend.

S&P 500

Among the many stock market indexes, the Standard and Poor's 500 is one of the most popular and closely followed.

The index measures the performance of 500 of the largest publicly traded US companies. The index is a cap-weighted index, meaning that the value of the S&P 500 index is calculated using the market cap of each company.

The index is a great way to diversify your portfolio. Its composition is largely composed of US companies, though a few international stocks are also included. In fact, nearly 48% of S&P 500 component companies' sales in 2014 came from foreign countries.

The index is a good indicator of the health of the US stock market, but it is not perfect. For instance, the S&P 500 index has seen some very high highs and lows. This is because the index contains companies in a wide variety of sectors.

The index includes companies in eleven sectors. These include energy, consumer durables, financial services, and industrial. S&P 500 companies include companies such as Google, Facebook, and Apple. These companies are household names and often have global reach.

To be included in the index, a company must be a publicly traded corporation with common stock. It must be listed on the New York Stock Exchange (NYSE) or the Investors Exchange (IEX). It must also have positive as-reported earnings in at least the past four quarterly periods. It must have an unadjusted market cap of at least $14.6 billion.

The index committee determines the companies to be included in the index based on liquidity and profitability. It also looks at market cap and other criteria. For example, a company must have at least 50% of its fixed assets in the United States.

Russell 2000

Thousands of small and mid-cap companies make up the Russell 2000 stock market index.

Each company is ranked based on market cap and weighted according to its performance. This is one of the most important ways to analyze the performance of smaller U.S. stocks.

The Russell 2000 index is a popular benchmark for small cap mutual funds. While it isn't an investment itself, it can be a useful tool for investors.

The index is made up of 2,000 companies, and is divided into two subindexes. One is called the Russell 2000 Value Index, which is composed of companies with low price-to-book ratios.

Another subindex is the Russell 2000 Growth Index, which is composed of companies with higher price-to-value ratios.

The index is a good way to gauge the performance of small companies, but it does contain more volatility than its big-cap counterpart. Investing in the Russell 2000 can be a good way to capture small-cap returns, but it's important to choose a fund that offers diversification.

There are several ETFs that track the Russell 2000, and each one has a purpose. Some are geared toward tracking specific industries or commodities.

Small-cap stocks tend to outperform large-cap stocks over time. They also have the potential to provide investors with greater growth. While they may be more volatile than large-cap companies, they also have more growth potential.

One of the reasons that the Russell 2000 is a popular benchmark for small-cap mutual funds is the diversity of its holdings.

These holdings span across industries, and this makes the index a bit less top-heavy than the S&P 500. The index's diversification smooths out the volatility of small stocks, and maintains the potential for market-beating performance.

S&P MidCap 400

Investing in the S&P MidCap 400 Index can reduce market risk while allowing you to diversify your portfolio.

The S&P MidCap 400 is a benchmark that measures the performance of mid-sized companies in the United States. It is considered to be one of the most widely followed mid-cap indexes in the market.

Mid-cap stocks typically grow earnings faster than large-cap stocks. However, they are also more volatile. They are often considered to be the "sweet spot" of the stock market.

Those companies are usually mature businesses, which have a better financial footing than smaller companies. They can also provide steady growth over the long-term.

However, investing in mid-caps can be a risky investment. Large-cap companies have more capital, which means they have more influence on the movement of the index.

However, they also have more potential for growth and higher rewards. As a result, investors expect these companies to have more growth opportunities.

Mid-cap stocks can be an effective way to diversify risk, but investors should consider their risk tolerance and investment goals before committing to them. Investors should also be aware of the fees and entry points of index funds.

Some may have high fees and higher minimum investments. Depending on the investment, investors may also have to pay for fund management.

Investors should also consider the risks of investing in foreign markets. These markets can be volatile, and their prices can be affected by foreign economic and political issues. A diversified portfolio should include stocks from different sectors and industries.

If you're interested in investing in the S&P MidCap 400, you may want to consider investing in an index fund. You can find these funds through mutual funds, ETFs, or investment products.

Nasdaq 100

Whether you're investing in the NASDAQ 100 or S&P 500, it's important to know how these markets work.

There are many factors to consider. The Nasdaq 100 Index is an index that reflects the growth of the United States technology industry. It is a modified market-capitalization weighted index, meaning that share prices are a major factor in determining the value of the index.

In the last two decades, the NASDAQ 100 has experienced tremendous growth. During this period, the index has outperformed many leading indexes, including the S&P 500 and the Dow Jones Industrial Average.

The index's value is highly correlated to earnings reports from the top companies. The top five companies by market cap account for 40% of the index's value.

In addition to technology companies, the index also includes companies from the health care, telecommunications, and transportation industries.

The largest holding in the index is Apple Inc., which has been ranked as the best global brand by Interbrand for nine consecutive years.

Companies in the technology sector make up 49.2% of the index, while communication services stocks make up 15.7%. The index is also home to Tesla, the largest electric vehicle manufacturer in the world. These companies have made a huge impact on the world's economy and consumers.

The NASDAQ 100 index also has companies that focus on big data, cloud services, robotics, and artificial intelligence. These companies offer indispensable products and services that are essential to the modern economy.

Whether you're investing in the NYSE or NASDAQ, the stock market can be volatile. Investing in the NASDAQ 100 can be a wise choice, particularly for younger investors with a high risk tolerance. However, there are a few things to keep in mind.

Wilshire 5000

The Wilshire 5000 Total Market Index, or simply the Wilshire 5000, is an American stock market index that measures the performance of all stocks traded on U.S. exchanges with readily available price data.

The index is maintained by Wilshire Associates, an investment management and research firm headquartered in Santa Monica, California.

The index always consists of exactly 5,000 common stocks (as opposed to other major indexes that only consider large-capitalization stocks), making it a broad gauge of the U.S. stock market's performance.

The index was first published in 1974, with a starting value of 100. The Wilshire 5000 is often used as a proxy for the overall stock market, though it includes only publicly traded stocks.

The Wilshire 5000 is not an investable index; however, there are exchange-traded funds that seek to track its performance, such as the iShares Russell 3000 ETF (IWV) and the SPDR Dow Jones Wilshire 5000 ETF (WLK).