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particular index will affect the value of the index. Famous indices in the world
are, but not limited to, the following: Dow Jones, Nasdaq, and S&P 500.
Having an index is a good way to sort the different kinds of stocks in the market.
After all, the stock market is composed of so many stocks. It will be chaotic if
you do not sort similar stocks together. It is also a point of reference for
comparison. You can compare the trend of the index value with the trend of the
price of particular stocks that belong to that same index. You can also compare
one index with another index and see which industry may be a profitable
investment.
Since there are countless of stocks in the market, and the index is able to sort all
of them out in an orderly way, an index acts as a good representation of the
entire market. For example, if you take a look at the index of the IT industry,
then you will know the average performance of the stocks in the IT industry.
This applies to other industries. Of course, there are other ways to make
comparisons depending on how the stocks are sorted in an index.
How the stocks are grouped together determines the type of classification of the
index. For example, in a world stock market index, such as in the S&P Global
100, you will find stocks that are found across the world. These are the stocks

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that come from different regions in the world, such as from Asia and Europe.
There is also what is called as 
national index.
As the name implies, this type of
index considers the performance of the stock market in a particular nation. You
can also find a more specific index that shows the behavior of the stock market
on a regional level. An index can also be grouped based on the method used to
sort them based on price. In a price-weighted index, the price of each stock is the
only thing that is considered to determine the value of the index. Therefore, any
change in the value of any of the stocks that belong to the same index will cause
a corresponding change to the value of the index concerned. There is also what
is referred to as a sector index. This will allow you to benchmark a particular
industry or sector. A sector index is formed by assigning a particular industry
classification based on the business of a company. Companies that have the
same principal business are then grouped together to form a market sector. There
are other indices that you can find. Just take note that indices are based on how
they are classified. When analyzing the stock market, it is good to study different
indices, so that you can have a better understanding of what is really happening
in the stock market.