Basic Material
Stock Market?
Imagine the stock market as a vast place where people buy and sell small portions of a company. These small portions are called stocks. So, when you buy a company's stock, it means you become a part-owner of that company. A stock exchange is an official place where stocks are traded. It’s like a traditional market, but specifically for stocks. Here, the price of stocks is determined by the demand and supply from investors. If many people want to buy a company’s stock, the price will go up. Conversely, if many want to sell, the price will go down.
What is a Stock Index?
Imagine a stock index as a number that represents the average price movement of a specific group of stocks. So, this stock index acts like a barometer indicating the overall market condition. If the index rises, it means the average prices of the stocks within that index are also rising, and vice versa.
Why are Stocks Index important?
Market Benchmark: Stock indices are often used as benchmarks to measure the overall performance of the market. For example, in Indonesia, the most commonly used index is the Composite Stock Price Index (IHSG). Benchmark for Portfolios: Stock indices are also used as a benchmark to measure the performance of an investment portfolio. If your investment portfolio provides a higher return than the index, it means your portfolio is performing better than the market as a whole. Foundation for Investment Products: Many investment products, such as index mutual funds, use stock indices as a reference.
Examples of Stock Indices
IHSG (Indonesia): Measures the performance of the stocks listed on the Indonesia Stock Exchange. S&P 500 (United States): Measures the performance of 500 large companies in the United States. Nikkei 225 (Japan): Measures the performance of the 225 largest companies listed on the Tokyo Stock Exchange.