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Index Anyone?

When the financial journalists want to describe what “the market” has done this day, this week, this year etc the most used (and possibly least understood by many people) system is to recount, as the major news item, what the “index” has done, for the day, the week, the year.

For Australians with a mild interest in the subject, the All Ordinaries Index will tell them about what happened on the Australian Stock Exchange (ASX) and the “Dow” (which is actually the Dow Jones Index) will describe Wall Street movement – the day’s doings on the New York Stock Exchange.

It is ironic that the name of the major Australian index implies all listed shares hence the addition of “Ordinaries”. Like the Dow it is neither “ordinary” nor “all” inclusive.

It is interesting that Warren Buffet (the world’s most famous investor) suggests that investing in an index fund should allow you to sleep nights and not do any thinking or worrying about where to invest your money.

Most fund managers aim to beat the index and they are usually choosy about the index they aim to beat!