Top 15 Stock Market Indices for Trading
Updated 26 February 2021
A stock market index is a selection of stocks. They are used by analysts and traders to compare returns on share prices.
By tracking a selection of stocks, they can interpret the state of the economy.
Stock market indexes can also indicate the health of the stock market and provide greater business confidence which is vital for a well-functioning economy.
Simply put, if a stock market index (also known as stock market indices) is performing well, investors will continue to invest via pension funds, insurance, private equity, etc.
This drives up confidence in the stock market and boosts the economy. If there is no confidence in the stock market index, then investors will reclaim their money and invest elsewhere.
There are many different types of stock market indices; many of them you will likely have already heard of.
The three most common types are global, regional and national.
Later in this article, we’ll provide you with a brief overview of each one and explain what the best types of stock market indices are for trading.
Stock Market Indices Trading – Why Is It So Popular?
Many experienced investors choose to trade indices. This is where you can speculate on the trading price of stock market indices.
With just one singular position, you can have access to an entire sector or economy, depending on which stock market indices you choose to trade.
You can choose to ‘go long’ – which is where you expect your investment price to rise. Or you can choose to ‘go short’ – which is where you are selling because you anticipate that the price will fall.
Your profit or loss is based on the accuracy of your prediction.
There are many reasons why someone may choose to commence stock market indices trading.
This means that the financial position of that item cannot be manipulated.
Instead, you’re buying access to potentially hundreds of companies at once.
This means that there are far lower risks involved.
And risk management is the basis of all trading.
When you purchase a share in a singular company, your investment depends on the management of that company. If there’s an internal issue (perhaps they are being sued by someone, or maybe the C-suite executives are failing), then your share price could be adversely affected.
In contrast, with stock market indices trading, you are simultaneously trading on multiple companies (via entire sectors or economies).
This means that your trade is less impacted by the singular performance of one company.
With a stock market index, even if one company’s share prices fall, the price of the entire index could still rise.
This makes it far more secure for investors.
What Are the Top 15 Stock Market Indices for Trading?
Before we share details of the top 15 stock market indices for trading, you must understand the differences in stock market indices.
As we’ve already mentioned, stock market indices are a group of stocks taken from an exchange.
They may be based on a particular economy (for example, the FTSE 100 tracks the 100 largest companies on the London Stock Exchange, and the DJIA tracks the value of the 30 largest blue-chip companies in the US).
Or they could be based on specific sectors such as the Footsie which is based on financial companies.
Typically, stock market indices for trading are split into three distinct groups: global, regional and national.
Let’s break down the most popular stock indexes for each one.
Global Stock Market Indices
Global stock market indices comprise stocks from companies located around the world.
This is advantageous because it means that you are not reliant upon one specific economy.
Here are the major global stock market indices:
FTSE All-World Index
As a global stock market index, the FTSE All-World Index covers approximately 3,900 stocks from across 50 countries.
It’s inclusive of developed and emerging markets and is based on large and mid-sized companies from around the world.
It is believed that the FTSE All-World Index covers approximately 90-95% of the investable market capitalization.
S&P Global 1200 Index
The S&P Global 1200 has access to approximately 70% of the global market.
It covers 31 countries and comprises seven regional indices.
The S&P Global 1200 covers a wide range of sectors including financial, consumer, healthcare and IT.
Dow Jones Global Titans 50
This index monitors the performance of 50 blue-chip companies from around the world.
Each company is a global giant in its sector, whether that’s technology, healthcare, financing or consumer items.
To be part of the Dow Jones Global Titans 50, the companies must make a percentage of their profits from global markets.
Regional Stock Market Indices
Regional stock market indices are based on groups of stocks from specific geographical regions.
They can be used to see how different areas around the world may be performing – for example, Asia, Europe, or Latin America.
Here are the major regional stock market indices:
S&P Asia 50 Index
This tracks 50 of the largest companies located in Asia, notably Hong Kong, South Korea, Singapore and Taiwan.
Notable firms included on this list include Samsung Electronics, Hyundai Motor Company and China Mobile.
Euro STOXX 50 Index
This Index looks at the top 50 blue-chip companies found within the Eurozone.
It was first launched in 1998 and is popular with investors who are keen to follow equity stock investments from across Europe.
Companies included within this index include LVMH Moët Hennessy Louis Vuitton, Siemens AG and L'Oréal SA.
S&P Latin America 40 Index
Tracking 40 Latin American blue-chip companies, the S&P Latin America 40 Index covers approximately 70% of the region.
It focuses on firms based in Brazil, Chile, Columbia and Peru.
National Stock Market Indices
As you may expect, national stock market indices are based on a selection of stocks from one specific country.
They are often a good indicator of the health of that country’s economy.
National stock market indices can also be used to track emerging markets where countries are experiencing a flourishing national economy.
Here are the major national stock market indices:
UK FTSE 100 Index
This tracks the 100 companies listed on the London Stock Exchange.
It features many globally recognized brand names, and it is one of the most popular exchanges in the UK due to the diverseness of the types of companies included within the index.
Investors are attracted to the FTSE 100 because the stocks are often international, allowing traders to benefit from global economies.
There is also good liquidity amongst the firms listed on the FTSE 100, and historically, there has often been a good return on investment.
US Dow Jones Industrial Average (US 30)
This is one of the world’s oldest stock market indices. It was launched in 1896.
The DJIA typically follows industrial companies listed on the US stock market which historically made up a significant part of the US economy.
As the DJIA only follows 30 companies, it’s not as influential as it once was. Instead, it’s been replaced by the S&P 500 which is a larger group of stocks.
However, it is still referred to by investors to compare the performance of the US economy over the past century.
Investors are attracted to this index because it’s been a reliable performer over the past decade.
Germany DAX Performance Index
The Deutscher Aktienindex is responsible for monitoring 30 of Germany’s leading companies listed on the Frankfurt Stock Exchange.
Due to its small size, it’s not indicative of the entire German economy but it does provide traders with an insight into three huge performers: SAP, Siemens and Linde.
Investors often consider the Dax 30 because of its liquidity. German companies are often heavily reliant on exporting and as such, the German stock indices are highly reliant on the global economy.
Canada S&P/TSX 60 Index
This index explores 60 companies listed on the Toronto Stock Exchange.
It features 60 companies, and investors are drawn to this because it offers cost-effective access to a large market share of the Canadian economy.
Companies listed on the TSX 60 include the Bank of Montreal, Shopify and Sun Life of Canada.
France CAC 40 Index
The French CAC 40 is popular with overseas traders because it heavily relies on foreign earnings.
Monitoring 40 companies, including global corporations such as LVMH and AXA, the CAC 40 is considered one of the leading benchmarks of the French economy.
Investors are drawn to the index because it includes many consumer brands. The French economy has also proved to be resilient, with many of the brands listed expanding rapidly.
Italy FTSE MIB Index
The Italian Milano Italia Borsa (MIB) is a major European stock index.
It tracks the performance of 40 of the leading companies listed on the Borsa Italiana which is the national Italian stock exchange.
Like many other national stock market indices, it features a variety of globally-recognized brand names including Campari, Ferrari, Pirelli and Unipol.
India BSE SENSEX Index
Formerly known as the Bombay Stock Exchange (BSE), the S&P BSE SENSEX tracks the performance of 30 companies across a range of sectors.
As an emerging economy over the past 20 years, the performance of the S&P BSE SENSEX has seen enormous growth, recognizing the impact of companies based in India.
China SSE Composite Index
As a composite index, it’s made up of A Shares and B Shares listed on the Shanghai Stock Exchange.
It provides a good overview of the Chinese economy; however, it should be noted that it is notoriously unpredictable.
The Chinese Stock Market doesn’t have the same history as other stock markets (such as Wall Street or the London Stock Exchange) and the SSE Index has been impacted by many mistakes that have been made.
Japan Nikkei 225 Index
This is one of the most active stock markets in Asia.
The Nikkei 225 features 225 stocks listed on the Tokyo Stock Exchange.
Formed in 1950, it has a long history and investors are drawn to it because the companies listed have good liquidity and are commercially competitive around the world.
As an export-heavy country, the Japanese economy is reliant on a flourishing global economy.
As you now know, there’s a lot to consider before choosing to trade stock market indices.
Although it’s a relatively reliable form of trading, it’s clear that there are a lot of different factors that could impact the performance of your trade.
With a choice of national, regional and global indices available, you need to weigh up the pros and cons of each and have a detailed understanding of global and regional economies before making a final decision.
Once you’ve chosen your preferred type, you should research before choosing which stock market index to trade.
We recommend taking a look at the history of each index. Many of them have decades of history and you can track their long-term performance, giving you greater insights into what to expect from peaks and troughs.