Whether you want to start a portfolio or are interested in investing in the stock market, there are some important factors to consider when choosing between different stock indexes.
Five main global stock market indexes
Using a stock market index can provide investors with a good sense of how the economy is performing. They can also help investors and analysts assess the performance of a particular sector or market. In addition, stock market indexes can be used as benchmarks to compare investment returns.
There are many different types of stock market indexes. They differ in size, scope, and purpose. Some focus on a smaller subset of the market, while others provide broad exposure to global stock markets. There are also regional stock market indexes, which may provide exposure to equities from particular regions.
The S&P 500 is the largest large cap stock market index in the United States. It includes 500 stocks, all of which are market-capitalization weighted.
The Hang Seng Index is the most prominent stock market index of the Hong Kong Stock Exchange. It includes shares of Bank of China, Industrial and Commercial Bank of China, and HSBC.
Shariah compliance stocks outperform conventional stocks
During periods of financial crisis, Islamic stocks have shown greater returns than conventional stocks. This is because Shariah compliance stocks are chosen based on the Shariah law. They are also a more diverse portfolio. In addition, they tend to have higher Sharpe and Jensen’s Alpha and Treynor ratios.
The first Islamic index to be instituted was the Dow Jones Islamic Market Index (DJIM). In 1999, the NIFTY 500 Index was renamed the NIFTY500 Shariah Index. The index measures the performance of 50 Shariah compliant stocks, based on the market capitalisation of these stocks.
A number of researchers have looked into the performance of Islamic stocks compared to conventional stocks. These studies show that Shariah stocks outperformed conventional stocks during the global financial crisis. But there is also a lot of academic debate about the magnitude of the differences.
European government bond yields remain near one-month highs
Despite the global economic and geopolitical turmoil of the last few years, the European government bond markets continue to be very attractive. Bonds offer a portfolio hedge against equity risk, and provide a reasonable income. Despite the turmoil, Europe’s economic growth is expected to pick up steam, and many governments are starting to provide fiscal support to households. Similarly, the European Central Bank’s monetary policy has taken a more hands-on approach.
For example, the ECB recently announced a program to support the euro-area banking system. This includes a scheme to provide cheap money to banks, and a scheme to stimulate loans to the euro-area economy. The scheme has been extended through June 2022. This is a big deal, as the ECB’s monetary policy will affect the euro for years to come.
Impact of COVID vaccine on stock price
During the pandemic, global stock markets experienced an unexpected drop in a matter of days. The rapid decrease in prices of risk assets followed by the outbreak of the virus had a significant impact on the liquidity of the markets. It also led to an increase in borrowing costs. In the United States, the first case of COVID-19 was reported to the Centres for Disease Control and Prevention on 22 January 2020.
The outbreak caused a stock market meltdown, which was primarily driven by investor panic and stringency. While the overall performance of the market recovered by seven months after the market bottom, sectors that experienced positive impacts from the pandemic continued to outperform others. In fact, sectors that had a positive impact on the pandemic outperformed others by a margin of seven percent to almost 20 percent.
Vanguard Small-Cap ETF
Investing in the Vanguard Small-Cap ETF indexes is a good way to diversify your investment portfolio. They offer investors exposure to a wide range of companies in the U.S., including both growth and value stocks.
These funds also offer investors diversification, growth, and dividends. Index funds have a track record of performing well, and are generally regarded as safe. They also reduce some of the risk associated with investing in small-cap stocks. However, they are not without their drawbacks.
Small-cap companies tend to be more volatile than larger-cap companies, and tend to lose value during market crashes. However, they also have more growth potential, and can outperform during bull markets. Small-cap stocks also tend to be more sensitive to the economy. Small-cap companies also have smaller balance sheets and are more likely to go bankrupt during recessions.