Welcome to The Stock Market Millionaire Podcast, episode number 19, US Stock Market’s Top Indexes That Every Trader Must Follow. Welcome ladies and gentlemen, hope it’s been a great day for you up to this point. I hope it’s been a great trading day as well. So let’s talk first about what an index is.
An index is basically – think of it almost like a mutual fund. It’s a way of grouping a series of companies together. You know, you’ve got major indexes out there like the Dow and like the NASDAQ and the S&P 500. There are others as well. There’s the S&P 100, there’s the Russell 2000. There are many indexes out there, but an index is just a way of housing or grouping together that series of companies. Now, does it mean they all fit together, that they all do the same thing? Not necessarily. You know, the NASDAQ is very much tech based, right, where the Dow is very much blue chip based, but that doesn’t mean they all do the same thing. And, some companies are in multiple, if not all of those indexes at the same time.
So if we look at the indexes that investors look at and the index that traders look at, for me near and dear to my heart are traders. For me – and I would ask this question whenever I teach a live event, that’s one of the first things I ask in the morning of day one – is what the traders look for? The Dow or the S&P 500? The NASDAQ is a whole other ball game, and traders look to the market as the S&P 500. Investors tend to look at the Dow, but keep in mind if you’re a NASDAQ trader, and what I mean by that is if you’re trading things like Apple and Amazon and so forth, then you’re focused very heavily on the NASDAQ market as well. But, when we look at a trader, it’s the S&P 500. If you look at an investor, it’s the Dow 30. That’s where traders and investors tend to go.
Now, if you look at – if we back up and talk into each individual index, so as an example, you’ve got the S&P 500 as a trader, that’s the one that I want to look at first. So I’ve got on my Omega Chartz, I’ve got pulled up by index, I can search and scan for companies. So, as an example, Amazon shows up in the S&P 500. It is one of the major companies in there from a price standpoint, from a movement standpoint. It’s an amazing stock with the way that it moves right. Along with that is company called Apple. You may have heard of it before, not the green Granny Smith apples. That’s not what I’m talking about. You know, Apple as the computer, the technology company, is another one. Booking, the travel company. Google. Here’s the interesting thing: you’ve got GOOG and GOOGL, two different symbols, but they have a tremendous market cap between them because both of them are in the S&P 500. So when it comes to a standpoint of stocks that are in the S and P there’s a lot of big names.
Now, are there little names in there too? Sure. I could sort the exact opposite way. I’ve got them sorted on my computer right now. And, you’ve got GE, which is a $12 and 55 cents stock. The funny thing is GE used to be responsible for 1% of the world’s GDP. Now, yeah. I’m not thinking so, not the way they’ve been doing lately. Right? Then you’ve got companies like, Ford – $13.61 stock, comparative to a three plus thousand dollar Amazon. All right?
So the S&P has made up of a variety of companies, but it’s called the S and P 500. I’ll give you a second, take a wild guess. How many companies are in the S and P 500?….Yes. 500. Now, is it always 500? No, actually right now in the S&P 500, if you guess 500, you’d be wrong. There are 505 in the S&P 500 right now. Go figure how they do something like that.
Then we’ll look at the Dow 30. Right? So let me go ahead. And I’m going to pull up on my computer here, the Dow, right? So in the Dow 30, these are very much blue chip stocks, right? If I rambled down the list of some of them that are in there, Goldman Sachs, United Healthcare, BA, Boeing CRM, Caterpillar, Home Depot, Amgen, Microsoft, Honeywell, Disney, American Express, JP Morgan. You get the idea. These are very much blue chip stocks. Visa, Dow. It’s funny that Dow chemical is in the Dow 30, right? These are great stocks when you’re trading options on these stocks. The one thing to consider is the – these are not big movers in many cases. Some of them will have some movement to them, but they’re not big movers. So you’re trading a company that is less volatile, which is why we want the Dow versus the S&P. There’s more volatility in the S&P 500 than there is in the Dow 30.
And then lastly, we’ve got the NASDAQ, right? So, let’s look at the top stocks to trade in the NASDAQ. So the top NASDAQ stocks to trade, we’ve got companies like Amazon, companies like Booking. You’ve got MSTR, you’ve got GOOG and GOOGL. Tesla, Nvidia Roku, Biogen. I love Biogen, it’s a great company. Uh, let’s see who else. We’re losing some velocity with some of these now, right? Coke, but it’s COKE instead of KO, zoom ZM. There’s some great companies.
When you look at the NASDAQ index fund, or you look at the top NASDAQ stocks, these are some of the top companies, but there are so many companies in there, you know, on the NASDAQ, you have a hundred. On the S&P 500 companies, you’ve got 500, or right now, 505. For the Dow Jones industrial averages, that is 30 stocks that we have in there, right? There’s a great opportunity to trade these. But the important thing is understanding that each stock, each index will have some slightly different movement to them. And there are things called ETFs, exchange, traded funds, that have slight variations to the index itself. Meaning, you can trade that it’s not the same dollar value because it’s a percentage of, like the SPY is 10% of the S and P 500, and then there’s the QS and the, the diamonds and the Russell, and so forth that you could trade. But you can take advantage of these as an individual stock in an index or trading the ETF in that index.
There, you have it. Folks have a great rest of your day, and I will see all of you at our next update. Take care. Bye for now.