subject: How To Really Watch The Stock Market [print this page] How To Really Watch The Stock Market How To Really Watch The Stock Market
Most people fundamentally understand that they need to invest in the stock market to make sure they have money sitting aside for them when they retire. But most people don't really know how to watch the stock market to see how their investments are doing and to see whether or not it's a good time to add more money to their investment account.
In this article today I want to talk about some of the things you should watch in order to get an idea of how well the stock market is doing and how well the economy as a whole is doing. The better the economy is doing, the better the stock market will probably be doing because the two are tightly correlated for obvious reasons.
Have you ever watched the nightly news? Have you noticed they're always talking about the S&P 500 index or the Dow Jones industrial average? "The S&P 500 went up three points today" the newscaster may quickly point out before moving onto another topic.
What the heck are they talking about? And why is this relevant? The S&P 500 and the Dow Jones industrial average are what we call "indexes". They are a list of stocks all aggregated up. In the case of the S&P 500 it's a list of the 500 top companies in the stock market.
If the S&P 500 is up five points, that means that on average those companies stock prices have risen on that day. Keep in mind that it's an average, some of the stocks may have gone up 20 points while some of the other stocks may have gone down 15 points, some might not have moved at all, and on and on...
Why is it important to know this stuff? Because they're good indicators of the overall market. If the S&P 500 went up today then there's a pretty good chance that the entire stock market went up today as well. At the very least it gives you a snapshot of the health of the stock market on a given day.
Not to get into technical territory here, but all stocks are correlated to some degree. That means if the stock market as a whole is going up, chances are the two or three stocks in your personal portfolio have gone up as well. Of course, the opposite is true as well. If the S&P 500 has gone down, then the chances are that your stocks have gone down too.
Paying attention to these two indexes is a good way to keep your eye on the pulse of the stock market. If you've noticed during the last few weeks that the S&P 500 has dropped day after day, then this gives you a pretty good idea that the stock market isn't doing very well at the moment.
Basically it's a very easy way to keep your eye on things without having to get into any technical details or mathematical calculations. And that's why they report it on the news every night and that's why so many people pay attention to it.
So if you're only going to do one thing to keep an eye on the stock market, watching the S&P 500 or the Dow Jones industrial average is definitely the best thing to do.
