1. Why do we need stock indexes?
The basic premise of owning a stock index is to make it easy for investors to trade. Imagine a stock market without these categories. It is just an open market. All company stocks listed on the exchange can be purchased. You don’t know which stocks have higher market value, you don’t know which stocks have lower value, and which ones It is a "better" stock. All investors will wander around like headless hunters. This is where the importance of stock indexes manifests. They make it easier for you to trade by grouping them and making them more visible.
2. Owning stock indexes is an important part of stock market investment
1. Group/Sort: Group all company stocks in an organized manner and select them through a certain strategy, which makes it easier to view the best stocks in one place. Sometimes you may just want to see how a certain department performs. For example, in the current era of pandemics sweeping the world and stock markets falling, you may be curious about the performance of the health sector. In the absence of a stock index, you have to find all the pharmaceutical companies individually, put them together and do your own calculations.
2. Evaluate stocks and market performance: Sorting can not only help you select stocks, but also provide you with guidance in the subsequent process. An organized stock index can help you find the answers to the following questions: if a stock performs better than a benchmark stock index, if a stock has a higher risk than other stocks, if it performs better or lower than those listed in the index Of other stocks, whether the stock performs better or worse than other stocks belonging to the industry, and many such issues. Stock indexes are a good way to record the individual and relative performance of stocks.
Stock indexes contain a lot of information about stocks: price history, changes in trading volume, peer comparison, industry performance, volatility, and understanding of market trends. If the collection of the 30 or 50 best companies shows an upward or downward trend, it means that the overall trend of the stock market is very important.
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