Market Index: A Benchmark for Investment Performance
Market index track the performance of specific group of securities and can serve as useful benchmarks for various investments. Here are some common indexes you may find helpful when evaluating the performance of your investment portfolio.
Standard & Poor's 500 Index (S&P 500)
This capitalization-weighted (cap-weighted) index comprises more than 75% of the total market value of all U.S. equities. The index tracks the stocks of 500 large U.S. companies representing all major industries. S&P 500 requires those businesses to have a minimum market capitalization (value) of $4 billion. The index was developed with a base level of 10 for the 1941-43 base period. It is a benchmark for large-cup U.S. stocks.
Standard & Poor's MidCap 400 Index (S&P MidCap 400)
Companies with a market value between $1 billion and $4.5 billion are represented by this cap-weighted index. These 400 stocks encompass approximately 7% of the total US equity market. S&P MidCap 400 was developed with a base level of 100 as of December 31. 1990. The index may be valuable as a measurement for mid-cap U.S. stocks.
Russell 2000 Index
The sector-weighted stocks that make up this index have an average market cap of $1.27 billion. The Russell 2000 Index is comprised of the smallest 2000 companies in the Russell 3000 Index, representing approximately 8% of the Russell 3000 total market capitalization. The index was developed with a base value of 135.00 as of December 31, 1986. The index is the most commonly used benchmark for small-cap U.S. stocks.
Russell 2000 Companies by Sector
By number of companies, as of Apr. 8, 2009
Courtesy: BusinessWeek
Morgan Stanley Capital International EAFE Index (MSCI EAFE)
This market cap-weighted index tracks performance of about 1,000 companies in 21 developed nations outside of North America. EAFE represents Europe, AustralAsia, and Far East. The index was developed with a base value of 100 as of December 31 1969. For many U.S. investors, MSCI EAFE may be considered the most common benchmark for international stock market performance among developed countries.
Lehman Brothers U.S. Aggregate Index (Lehman Agg)
This bond index includes government, mortgage-backed, asset-backed, and corporate securities with at least one year to maturity. Lehman Agg serves as a barometer for investment-grade, domestic fixed-income performance. It is also useful for measuring overall interest rate direction.