• Jagraj Singh

Equity Markets: A Brief Overview

Equities? Don't you mean stocks Jag? They always go up right?



Sort of but not quite.


Equity markets are simply where the buying and selling of stocks occurs. The tradable stocks in the market are either publicly listed stocks, or privately owned stocks. Usually done so through brokers, these markets are used as a method for companies to raise large capital in return for investors to possess a tiny part of the company.


You may have heard of the largest equity markets out there, namely the New York Stock Exchange, London Stock Exchange, Tokyo Stock Exchange and the Shanghai Stock Exchange.


On these exchanges are something called indices, which allows us to track the performance of a group of assets. These serve as benchmarks and have become a very popular way for passive investing for many people.


There are a few big indices, let's have a look at them!


DAX 30


Germany's Premier Stock Exchange consisting of the Top 30 German companies.


Facts:

  • Founded in 1988

  • Weighting Method - Capitalisation

  • Operator - Deutsche Borse

Key Characteristics:

  • Volatile

  • Fast Moving

  • Prone to False Breakouts

  • Best Suited to Aggressive Traders

  • Strict Risk Management Needed

Oh boy, the DAX. Also known as the Widow Maker, it is not for the faint-hearted!


As mentioned, it is a very volatile and fast moving market. Not recommended for beginners new to trading!



Includes companies such as Adidas, Allianz, Bayer, Daimler, SAP, Siemens, Volkswagen.



EUROSTOXX 50


Blue Chip representation of the largest 50 companies in the Eurozone, heavily dominated by France and Germany.


Facts:

  • Founded in 1998

  • Weighting Method - Free-float Market Capitalisation

  • Operator - Deutsche Borse

Key Characteristics:

  • Much less volatile than the DAX

  • More liquid than DAX

  • Requires more experience and patience

The Eurostoxx is a possible market option if you are looking to trade the Turkish Lira.


Includes companies such as Allianz, Airbus, LINDE, Sanofi, SAP, Siemens, TOTAL, Unilevers.



FTSE100


The UK's Premier Stock Exchange consisting of the Top 100 (actually 101) large cap companies on the London Stock Exchange.


Facts:

  • Founded in 1984

  • Weighting Method - Capitalisation

  • Operator - FTSE Group

Key Characteristics:

  • Inverse correlation to the Pound

  • Responds well to technical levels

  • Good reflection of economic and international events

The FTSE affects most people in the UK as pension fund holders which are likely to be invested in UK equities. The performance of the FTSE correlates to how well their pension does.



Includes companies such as AstraZeneca, BP, Diageo, GlaxoSmithKline, HSBC Holdings and Royal Dutch Shell.



S&P 500


Benchmark index representing the Top 500 (actually 505) companies on the New York Stock Exchange.


Facts:

  • Founded in 1957

  • Weighting Method - Free-float Market Capitalisation

  • Operator - S&P Global

Key Characteristics:

  • Good representation of individual sectors

  • Benchmark for corporate performance in the US

  • As of Aug 2020, average 10-year annual return of 12.66%

The S&P is the benchmark index in the Western world, and overall it's a key indicator of US economic performance. Most Americans and even UK investors invest in an index that track the S&P.


Includes companies such as Apple, Amazon, Alphabet, Berkshire Hathaway, Facebook, Microsoft and Visa.



NASDAQ 100


This American index consists of the Top 100 (actually 103) largest non-financial companies listed on the Nasdaq stock market.


Facts:

  • Founded in 1985

  • Weighting Method - Capitalisation

  • Operator - Nasdaq

Key Characteristics:

  • Tech heavy

  • Sensitive to daily sentiment

  • More volatile than the S&P generally

The Nasdaq is similar to the S&P, however the fact it has no financial companies distinguishes it pretty well. A huge 55% of the index is tech weighted and 24% is consumer services.



Includes companies such as Apple, Amazon, Alphabet, Facebook, Intel, Microsoft, Pepsico.



DOW JONES INDUSTRIAL AVERAGE


American Index comprised of 30 blue chip companies, contains all major industries apart from utilities and transportation.


Facts:

  • Founded in 1896

  • Weighting Method - Price

  • Operator - S&P Dow Jones

Key Characteristics:

  • Quite volatile

  • Best suited for experiences pros

  • Not the best indicator of the stock market

Historically the Dow Jones has been a key index as it was created just before the 1900s, and originally only contained 12 stocks!


Includes companies such as 3M, Boeing, Caterpillar, Coca Cola, Disney, IBM, J&J, Nike, Pfizer and Verizon.



Hope all of that was useful, leave a comment if I missed anything out and make sure to share the website with friends and family!

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