Most stocks are traded on exchanges, which are places where buyers and sellers meet and decide on a price. Some exchanges are physical locations where transactions are carried out on a trading floor. You’ve probably seen pictures of a trading floor, in which traders are wildly throwing their arms up, waving, yelling, and signaling to each other. The other type of exchange is virtual, composed of a network of computers where trades are made electronically.

The purpose of a stock market is to facilitate the exchange of securities between buyers and sellers, reducing the risks of investing.

The New York Stock Exchange

The most prestigious exchange in the world is the New York Stock Exchange (NYSE). The “Big Board” was founded over 200 years ago in 1792, with the signing of the Buttonwood Agreement by 24 New York City stockbrokers and merchants. Currently the NYSE, with stocks like Exxon Mobil, Citigroup, Pfizer, Wal-mart, and Coca-Cola, is the market of choice for the largest companies in America.

Stock Indexes

Stock market indices are commonly used as a benchmark for your investments or portfolio, and are a measure of performance for a particular set of securities.

There are approximately 5,000 U.S. indices, but the three most widely followed are:

  • Dow Jones Industrial Average (DJIA)
  • The S&P 500
  • The Nasdaq Stock Market Composite.

The Wilshire 5000 includes all of the stocks in the U.S. stock market. Most other indexes represent smaller sections of the market.

Key Tips

Stock indexes are great tools for researching trends and historical data over long periods of time, however, most indices only reflect a portion of the market.

Considerations to take into account prior to investing are:

  • Decide what, where, and when to buy
  • Research the investments being considered
  • Pick stocks, an index fund, or a combination
  • Check investment minimums, fees, and costs
  • Click here for Key Tips outlined in our Types of Stocks page.

Warren Buffett has said that the average investor needs to only invest in a broad stock market index to be properly diversified. The S&P 500, Wilshire 5000 or Russell 3000, and Barclay’s US Aggregate Bond Index are considered to be broad market indices.

More Information

Association Financial, LLC, and Association Financial Services, LLC, can provide you with a wide range of advisory services (whether fixed or variable investments), including:

  • Annuity selection (fixed or fixed-indexed)
  • Assistance in deciding when to buy and sell your investments
  • Review of insurance and investment portfolios, as well as transferring assets or qualified plan rollovers
  • Individual bond, commodity, equities (stocks), ESG stocks, Exchange Traded Product (ETP), investment trust, and REIT selection
  • Strategic asset allocation strategies including re-balancing
  • Attorney and CPA services
  • and much more.

Contact us here for more information.

Investing in securities involves risk of loss that clients should be prepared to bear.