10 Most Important Global Stock Indices - A Detailed Guide for Investors (Updated 2024)

Why Are Global Stock Indices Important?

Global stock indices have now become an indispensable tool for assessing the economic health of countries. Worldwide, there are more than 60 stock exchanges, each with thousands of listed companies. Investing directly in individual stocks requires extensive experience and analysis time, but through global stock indices, you can access a diversified portfolio of leading companies like Unilever, Pepsico, Apple, Microsoft with just one transaction.

What Is a Stock Index?

A global stock index is a measure of the economic performance of a sector or country, composed of Blue Chip stocks—companies with the highest market capitalization. For example, the FTSE 100 index includes the 100 largest companies by market value on the London Stock Exchange, representing 81% of the total market capitalization. Similarly, Vietnam’s VN30 index is calculated based on the 30 largest companies by market capitalization on the Ho Chi Minh City Stock Exchange (HOSE).

Investing in a global stock index is like owning a professionally diversified investment basket. Instead of selecting individual stocks, you only need to follow a single index.

Advantages of Investing in Global Stock Indices

Time and Effort Saving

Global stock indices are usually composed of large, financially stable companies. Investors don’t need to spend much effort analyzing each stock thoroughly; they only need to monitor the index’s movements.

High Returns, Low Risk

Studies show that investing in the S&P 500 index over 50 years yields an average annual return of about 7% (sau khi điều chỉnh lạm phát). This return is significantly higher than traditional bank interest rates.

Diversified Investment Portfolio

A global stock index typically includes at least 30-100 companies. When one company’s stock price drops, others may rise to compensate, so the index’s volatility is usually much lower than that of individual stocks.

The Top 10 Most Traded Global Stock Indices

US Stock Indices

S&P 500 - America’s Leading Index

The S&P 500 is the most traded index worldwide, comprising 500 of the largest companies on US stock exchanges like Apple, Microsoft, Amazon. Launched in the 1950s with an initial point below 10, it has now risen to 2955.45 points, a 296-fold increase.

Despite experiencing multiple economic crises, the S&P 500 has shown a stable long-term upward trend. During the 1929-1932 Great Depression, it lost over 50% of its value, and during the 2008 financial crisis, it dropped 37%. However, in the long run, it always tends to recover and grow.

NASDAQ 100 - Technology Index

The NASDAQ 100 is famous for its concentration of technology companies, including the 100 largest non-financial firms listed on NASDAQ (không bao gồm các công ty tài chính). It also includes major tech companies from other countries like China’s JD.com and NetEase.

Unlike the S&P 500, which includes only large-cap companies, NASDAQ 100 also contains mid- and small-cap high-growth firms. Therefore, its fluctuations reflect the health of the tech sector and market speculation trends very well.

Dow Jones Industrial Average (DJIA) - Leading Company Index

DJIA is composed of 30 of the largest US companies, including Apple, Intel, Goldman Sachs. Along with the S&P 500, DJIA is considered one of the most important indices in the US market.

Since its inception until 2021, the index has changed its constituent companies 54 times. The most famous company previously in the index was General Electric, but it has been removed recently. DJIA is known for its list of blue-chip companies with consistent dividends, indicating that an index does not necessarily represent the entire market but can represent a specific sector.

( European Stock Indexes

)# FTSE 100 - UK Index

The FTSE 100 was launched on January 3, 1984, with an initial value of 1000 points. By 2000, it increased to 7103.98 points, a 7-fold rise over 16 years.

During the 2007-2010 global financial crisis, FTSE also declined to around 3500. In March 2017, it reached a record high of 7777.62 points in a trading session.

DAX 40 - Germany’s Index

DAX is Germany’s stock index, launched in 1987 with an initial level of 100. It has two versions: a total return index ###tính cổ tức### and a price index (không tính cổ tức).

DAX’s growth has been remarkable—rising from 100 points to 11,391 points, an increase of over 10,000% in 33 years. DAX is often compared to the Dow Jones of the European market.

(# CAC 40 - France’s Index

The CAC 40 was launched in 1987 with an initial 1000 points, comprising 40 of the largest companies listed on Euronext Paris. Notable companies include Hermès, Accor, BNP Paribas.

The index reached its peak in September 2000 with 6922.33 points during the dot-com bubble. Companies in the index are evaluated quarterly based on market capitalization and revenue over the past 12 months.

)# Euro Stoxx 50 - Eurozone Regional Index

Euro Stoxx 50 was launched in 1998 and is one of the most liquid stock indices in the Eurozone. It is reviewed annually in September.

The highest level was reached in 2000 at 5464. After the 2000 and 2008 economic crises, the index declined sharply and is gradually recovering. However, it has not yet returned to its 2000 peak.

Asian Stock Indices

Nikkei 225 - Japan’s Index

Nikkei 225 was first calculated in 1950 and reached its peak in 1989—during Japan’s real estate bubble—with 38,957 points, a 600% increase over a decade. Since then, it has lost almost all these gains and has fluctuated between 14,000 and 26,000 points in recent years.

Hang Seng - Hong Kong Index

Hang Seng was launched in 1969 with a base value of 100 points. It includes 50 of the largest companies on the Hong Kong Stock Exchange, representing 58% of total market capitalization. Notable members include HSBC and Tencent.

The 10,000-point milestone was first crossed in 1993, 20,000 in 2006, and in less than 10 months, Hang Seng surpassed 30,000 points in October 2007—an all-time high. The 2007-2008 financial crisis caused a 30% drop, but it quickly recovered to 20,000 points in 2008. To date, the index fluctuates around 20,000 and has not yet broken back above 30,000.

KOSPI - South Korea’s Index

KOSPI was launched in 1980 with an initial level of 100, built from all listed companies on the Korean stock exchange. Major companies include Samsung, Hyundai, Naver.

KOSPI’s fluctuations reflect the overall performance of South Korea’s economy. It surged during 1985-1988. Although it experienced declines during economic crises, the long-term trend remains upward.

Methods to Trade Global Stock Indices

Understanding CFDs ###Contract for Difference###

A common way to trade global stock indices is through CFDs (Hợp đồng chênh lệch giá). Unlike direct investment in indices, CFDs allow traders to profit regardless of whether the index rises or falls.

For example, if you observe that NASDAQ 100 is highly volatile and believe the price will increase because the pandemic has led more people to use tech apps, you can open a long position (Long). Conversely, if you think the index will decline, you can open a short position (Short).

( Using Leverage )Leverage###

An attractive feature of CFDs is the ability to use leverage to amplify potential profits. Suppose you use 1:10 leverage; for every 1-point increase in NASDAQ 100, your profit increases by $10.

For example: NASDAQ 100 is trading at 9579 points. You predict it will rise to 9700 and use 1:10 leverage. When the index actually reaches 9700, your profit will be ((9700 - 9579) x 10 = 1210 USD). Similarly, if you open a short position and the index falls, you will also profit.

Useful Tips for Trading Global Stock Indices

Choose Indices with High Liquidity

When selecting indices to trade, prioritize those with high liquidity to reduce spread costs (spread).

Research Macroeconomic Conditions

Before investing, thoroughly understand the macroeconomic situation of the country, including GDP, key economic events, and political stability.

Focus on a Few Indices

Initially, concentrate on 1-3 indices you understand well before diversifying your portfolio. Global stock indices tend to rise in stable economies, so focus on long positions (mua).

Learn Technical Analysis

Stock markets are cyclical; historical price movements tend to repeat in patterns. Learning technical analysis helps identify better trading opportunities.

Conclusion

Global stock indices are fundamental investment products that any investor interested in the global market should understand. From the US’s S&P 500 to the UK’s FTSE 100, from Germany’s DAX40 to Japan’s Nikkei 225, each index provides valuable insights into the economic health of its region. By mastering knowledge of these indices and applying sound trading tips, you can develop an effective investment strategy for the future.