What Are the S&P 500, Nasdaq, and the Dow?

This is important because when I first started learning about investing, I didn’t know they were talking about. So whenever I heard the dow is up or s&p are up, I was just confused. So today I'm going to explain what they are.

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1. What an Index is
- And index is just a Measurement of performance and it helps you track the ups and downs of the market your tracking
- Its like tracking the performance of a school district by taking the test scores of the class and them creating a sample size
- So if we can say that 80% of test scores are up, in a way we can say the overall edition of the district is also up, but if tests 80% of test scores are down, then obviously we have a problem.

Tip: whenever you hear market index, think about tracking the performance of something.

2. The first index we are going to talk about is the Dow Jones
- This was created back in 1894 ( meaning I was around negative 103 years old, on the verge of being born)
- This was created by Charles Dow and Edward Jones ( thus Dow Jones)
- A very creative name I know

What this index does:
- It tries to track the overall health of the stock market
- By tracking the 30 largest companies in the US
- Which only account 25% of the total market value

However:
- You might be thinking, how is that a sample size that small of 30 companies can determine the health of the entire stock market with well over 1000 other companies
- It's because of the parado principle aka the 80-20 rule
- Which means that 80% of results derived from 20% of your efforts
- And that’s why by having this small market size it still does a great job at tracking the entire market

Tip:
- When you here the dow is up: it means the overall market is up or down
- And yes you can buy an ETF that tracks the overall market like VTI or for example an index fund like VTSAX
- However, you don’t need to own the entire market to get the average, because of the 80-20 rule so keep that in mind

3. The s&P 500
- This index tracks the 500 largest companies in the US
- And this accounts for roughly again 75% of the US stocks
- And btw it stands for standards and poor, and yes companies can be listed in both the s&P and also the dow

And btw:
- It accounts for the biggest junk of my entire portfolio with the ETF VOO and also the mutual fund VFIAX
- I invest in this index in a way to track the overall performance of the US stock market and get the average return each year
- And I think it has a standard deviation of 1 or something like that.

4. Nasdaq
- This tracks around 3300 stocks that are listed on the Nasdaq stock market
- So it has a more broad-based than the dow but also a higher concentration in tech stocks
- So a lot of people use it as an index of tech companies and the overall performance of that market

5. Remember
- Companies go in and out of this list
- Just like the Forbes list
- And there are other less popular indexes like Russell 2000 or the Wilshire 5000, or even the Nasdaq 100

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*Some of the links and other products that appear on this video are from companies in which Tommy Bryson will earn an affiliate commission or referral bonus. Tommy Bryson is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available. I'm an Accountant but I'm not your Accountant, always review information with your Accountant/CPA and your Financial Advisor.

[TommyBryson]

Here are some books to start learning about investing

[JordanWilliamsN]

Always spreading the knowledge! 💪🏾💪🏾💪🏾

[Je.rone_]

Yeah i remember back in there day being so confused by the stock market, crazy how things change

[maxxlaw]

Thanks Bryson, I was twice your age before I figured out the money game. You are AWESOME young man!

[brandonspicer]

I'm glad I found your channel.
Like & Subscribe

[KelechIwuaba]

I love industry specific ETF that gives a great feel of how each industry is doing specifically.

[.Koreans.American]

Cool explanation 🙌 Tommy is the best financial teacher!

[ThinkMoneyBenny]

All 3 are places where you can BUY THE DIP 🚀

[James-clkx]

Dropping knowledge and value per usual! Great video!

[andrewthomas]

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[DreMan]

What you think of playing the wheel with (spy or Microsoft). Which 1 do you think is less risky?

[Paul-dwcl]

I’m 1.5x @TommyBryson ‘s age and I’ve been learning a lot. Valuable info in your vids as always, man, thank you.

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[WalletInvestUSA]

VTI is amazing! I have 280 shares and def buying more!

[Mistyfgdf]

Looking at these major exchanges for their best holdings = Gonna be my bread and butter
My portfolio probably will be 15%-25% Voo, but everything else is the solid companies for better returns

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