New to Share Market Terminology

Hi again, watching the News etc what is meant by the share market was down to day by xxxxx no of points.

Can you pls give an example. EG Share fund is worth $500K, share market goes down 10 points, does this mean I have lost 10 points of my money which is ??
Does it depend on what shares you have?? Aust, International??

 

Hi Chris,

When it seems like they say 'the sharemarket was down 20 points', what they're probably saying is 'the ASX200 was down 20 points' or 'the Dow Jones Industrial Average was down 20 points' or something similar. It's all in relation to various indexes, which are a mathematical representation of the value of whatever the index is measuring.

For example, the ASX200 is Australia's most notable index. It tracks the value of Australia's 200 biggest public companies. eg BHP, Comm Bank, Woolworths etc etc. It works out the total market value of all these 200 companies, and expresses them 'indexed' to a score.

Here is an example:

http://www.asx.com.au/investor/pdf/share_price_movements.pdf

It started off as '1', now it's over 6000.

Now if the ASX200 index goes up 20 points, it doesn't mean that every single one of those 200 companies went up in value. All that matters is the total value, so the bigger the company, the greater it's influence in moving the index. I think currently BHP represents about 14% of the index. At one point News Corporation represented about 22% from memory.

There are heaps of different indexes, it depends what you're trying to measure.

Small companies, big companies, international companies, health companies, IT/telecommunication companies etc etc.

Here's a few of them:
S&P/ASX share market indices calculated by Standard & Poors updated in real-time (ASX)

So sometimes you'll find them say the ASX200 went down, but your portfolio actually went up!

Unfortunately, the opposite is just as likely also!

 

Hi Chris,

The ASX All Ordinaries (which is is very similar to the ASX/S&P300) was started in Jan 1980 at 500.

A few years ago (maybe 5 or so?) the ASX bowed to the standardising of indexes, ie, having a fixed number of stocks in the index hence 20, 50, 200, 300, 500, whereas the All Ordinaries had a constantly changing number of securities in it's index.

Cheers,

Dan