US Indexes: AMEX Composite A capitalization-weighted index of all stocks trading on the American Stock Exchange. NASDAQ 100 The 100 largest non-financial stocks on the NASDAQ exchange. NASDAQ Composite Midcap index made up of all the OTC stocks that trade on the Nasdaq Market System. 15% of the US market. NYSE Composite A capitalization-weighted index
Dow Jones Industrial Average
The Dow Jones averages are computed by summing the prices of the stocks in the average and then dividing by a constant called the “divisor”. The divisor for the Dow Jones Industrial Average (DJIA) is adjusted periodically to reflect splits in the stocks making up the average. The divisor was originally 30 but has been
Stock Indexes
3 Different Types of Stock Indexes:Contents There are three major classes of indexes in use today in the US: Equally weighted price index – An example is the Dow Jones Industrial Average. Market capitalization weighted index – An example is the S&P500 Industrial Average. Equally weighted returns index – The only one of its kind
Income and Royalty Trusts
Income and Royalty Trusts are special-purpose financing vehicles that are created to make investments in operating companies or their cash flows. Investors supply capital to a trust, a legal entity that exists to hold assets, by purchasing “trust units”. The trust then uses these funds to purchase an interest in the operating company. The trust
Holding Company Depositary Receipts (HOLDRs)
A Holding Company Depositary Receipt (HOLDR) is a fixed collection of stocks, usually 20, that is used to track some industry sector. For example, HOLDRs exist for biotech, internet, and business-to-business companies, just to pick some examples. A HOLDR is a way for an investor to gain exposure to a market sector with at a
Exchange-Traded Funds
Exchange-Traded Funds and Unit Investment Trusts An exchange-traded fund is a collection of securities such as stocks or bonds that are bundled together in a special vehicle. The legal entity, that special vehicle, happens to be a unit investment trust. Investors can buy tiny little pieces of the trust (“units”). So although an exchange-traded fund
What Causes Stock Prices to Change?
One frequently asked question is “Why did my stock in X go down/up by this large amount in the past short time? The purpose of this answer is not to discourage you from asking this question in misc.invest, although if you ask without having done any homework, you may receive a gentle barb or two. Rather, one purpose is to inform you
Dividends
A company may periodically declare cash and/or stock dividends. This article deals with cash dividends on common stock. Two paragraphs also discuss dividends on Mutual Fund shares. A separate article elsewhere in this FAQ discusses stock splits and stock dividends. The Board of Directors of a company decides if it will declare a dividend, how
Cyclical Stock
Cyclical stocks, in brief, are the stocks of those companies whose earnings are strongly tied to the business cycle. This means that the prices of the stocks move up sharply when the economy turns up, move down sharply when the economy turns down. Examples: Cyclical companies: Caterpillar (CAT), US Steel (X), General Motors (GM), International
American Depositary Receipts (ADRs)
An American Depositary Receipt (ADR) is a share of stock of an investment in shares of a non-US corporation. The shares of the non-US corporation trade on a non-US exchange, while the ADRs, perhaps somewhat obviously, trade on a US exchange. This mechanism makes it straightforward for a US investor to invest in a foreign