Whenever we open any business channel, we see a bar at the bottom which shows the current market price (last traded price) of stock and typically on the bottom right corner, there is a number which shows the current value of an index. Like in the snapshot from Fox business, it is showing Dow Jones Industrial Average (Dow Jones or simply Dow) currently priced at 26503.77. In this snapshot, there are three indices shown at four different places which lead us to ask questions such as what is an index? What is its significance? Why is it so important? Fox Business Channel snapshot An index is an indicator or a measure of something. In the world of investing, it is a hypothetical portfolio of stocks and bonds designed to represent the market. When people say the market is moving up and down, they are referencing the movement of the index. Some of the most popular stock market indexes are: Dow Jones Industrial Average (US) S&P 500 (US) NASDAQ (National Association of Sec...
Investing is essential to create wealth and beat inflation. In India, people have a tendency to save money as a contingency fund. We, Indians, like to invest mostly in bank’s fixed deposits, gold, real estate, and now stocks and mutual funds. The craze of investing in stocks and mutual funds is picking up with lots of young ones starting to invest. This leads us to a very important question – which is better short-term or long-term investing? So, let’s figure this out with the help of two hypothetical investors – Vishal & Tarun. Vishal is an old-fashioned boring investor who likes to buy few stocks and hold on to them for some years, say 5 years. Tarun, however, is like a gunslinger who likes to get out of the stocks as soon as he books a decent profit. Vishal invests ₹10 lacs in some stocks at the annual rate of 10 % for 30 years. Tarun, meanwhile, also invests the same amount of money and receives the same rate of return for the same duration of time but he trades his entire port...