Term:INDEX

A weighted or unweighted average of the prices or market cap of a group of shares. There are many types of indices for sectors, sub-sectors and entire markets. There are also a number of ways to weight the data in an index, but essentially the idea is to allow for the fact that the market capitalisation of shares differs widely within the same sector. This is partly because each company has a different number of shares in issue. Over and above this, shares leave the sector, and new ones join it. The calculation of indices is done according to the FTSE/JSE ground rules. Indices are useful for determining the general direction of a sector and perhaps comparing individual shares with the group average. Sectors may also be compared, and a careful study of index trends will allow you to move your money around the market from one profitable sector to another. Take a look at the “Market Carpets” feature of your software which is under the “Scans” menu at the top of your screen in the center. Securities may be linked to indices. The Satrix 40 tracks the performance of the underlying index (namely the ALSI). It falls under a sector called TIFS/IX37 (Traded Index Funds). Consider the chart of Satrix 40 over the past 17 years:

index

Satrix 40 Index

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