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Help you make money in the US stock market!

Have a nice weekend everyone!

The representative from the Futubull Course is here too!

Today is the course series “20 Lectures on US Stock Investment”

Lecture 7 “Let me take you to know the composition of the US stock index”

Friends of the cows quickly move the little benches, let's go to class together~

In a letter to shareholders in 2014, Buffett unabashedly responded that if a will was made, 90% of the cash under his name would allow the custodian to buy index funds;

In fact, in previous shareholders' meetings and letters to shareholders, Buffett has recommended ordinary investors to buy index funds no less than ten times.

As early as 1993, Buffett recommended index funds for the first time, saying, “By investing in index funds on a regular basis, an amateur investor who doesn't understand anything can actually beat most professional investors.”

In 2007, in an interview with CNBC TV, Buffett also emphasized that for the vast majority of small to medium investors who don't have time to study the fundamentals of listed companies, low-cost index funds are their best choice for investing in the stock market.

If we follow Buffett's advice to buy index funds, then we first have to figure out how the US stock index is structured.

The three major US stock indices

Niu You, who has read news reports related to US stocks, should be familiar with the terms “Dow, Nasdaq, and S&P 500.” These are the three major stock price indices (Stock Indices) of the US stock market.

The stock price index is an indicator that describes changes in the overall price level of the stock market. It selects a representative group of stocks (there are big and small, there will be industry divisions), and their prices are weighted and averaged, and obtained through certain calculations.

The specific stock selection and calculation methods for various indices are different. This kind of stock index is a price average that indicates changes in the stock market. When compiling a stock index, it is usually based on a certain day of a certain year, month, and day. The stock price for this base period is used as 100, and the stock price for each subsequent period is compared with the base period price to calculate the percentage of increase or decrease, which is the stock index for that period.

Investors can determine the trend of changes in stock prices based on the rise and fall of the index. Also, in order to be able to reflect stock market trends to investors in real time, almost all stock markets immediately publish stock price indices at the same time as stock prices change.

1. Dow Jones Index (Dow Index for short)

The world's most famous index, Dow Jones, was founded in New York in 1885 and has a market capitalization of 7.5 trillion dollars, including the top 30 listed companies in the US. Typical representatives include$apple (AAPL.US) $,$ Coca-Cola (KO.US) $,$ Microsoft (MSFT.US) $,$Visa (V.US) $,$Walmart (WMT.US) $etc.

The price is the total price calculated by combining the individual stock prices of each company as an index standard (easy to calculate, no need to take an average value). It is one of the oldest and most credible US market indices that measures industrial development in the US stock market.

2. Standard & Poor's 500 (S&P 500 for short)

It will be less volatile than Dow Jones because it includes more diverse company sizes and types. Includes 500 large companies listed on the NYSE and NASDAQ, including leading stocks in each industry, such as$Adobe (ADBE.US) $,$Western Digital (WDC.US) $,$ Marriott Hotel (MAR.US) $etc.

3. Nasdaq Composite Index (NASDAQ for short)

The Nasdaq is one of the three major indices in the US, and is also an exchange. It includes technology, services, media, healthcare, biotechnology, and transportation stocks. Typical examples are the four largest US technology stocks:$apple (AAPL.US) $,$ Microsoft (MSFT.US) $,$Amazon (AMZN.US) $,$Google (GOOG.US) $。 Unlike the S&P 500 Index, there are no financial institutions in this constituent stock.

US Stock Market Sectors

According to specific industry types, the US stock market can be divided into ten sectors: finance, utilities, non-essential consumer goods, daily consumer goods, energy, healthcare, industry, technology, telecommunication networks, and materials. Next, we will look at the detailed introduction of the different sectors separately.

1. Finance

The financial industry includes banks, investment funds, insurance companies, real estate companies, etc. Generally, most financial industries generate income from mortgages and bank loans, and their value of gain rises as interest rates rise.

2. Public utilities

The utilities sector includes electricity, gas, and water companies. Generally, the industry generates revenue from consumers and businesses, and the industry provides an above average dividend yield.

3. Non-essential consumer goods

This includes media companies, consumer service providers, clothing companies, and consumer durables. In general, when the economy improves, these businesses benefit more as consumer spending increases.

4. Daily consumer goods

The consumer necessities sector includes food and beverage companies. Despite the economic downturn, consumers are unwilling to cut this part of their spending from their own budgets. The income of these companies is stable, mainly due to consumers' daily expenses. In general, these companies are defensive companies that have endured the economic downturn.

5. Energy

The energy sector includes oil and gas exploration and extraction companies, as well as other companies such as integrated power companies, oil refineries, etc. Generally, the revenue generated by these companies is affected by price fluctuations of crude oil and natural gas and other commodities.

6. Healthcare

The healthcare sector includes biotech companies, hospital management companies, medical device manufacturers, and others. Generally, this industry is considered to be an industry that combines attack and defense. Because people always need to go to hospitals to see a doctor, this industry will develop quite well.

7. Industry

The industrial sector includes aerospace, military, machinery, civil engineering, manufacturing, etc. In general, the growth of the industry is determined by the demand for construction and manufacturing products.

8. Technology

The tech sector includes electronics manufacturers, software developers, and information technology companies. Technology companies have grown strongly over the years, and in general, these companies are usually affected by product iteration cycles and economic health conditions (such as strong, economically favorable technology stocks).

As of August 28, when the US stock market closed, most of the top ten in total market capitalization were tech giants. For example, the big four tech giants:$apple (AAPL.US) $,$ Microsoft (MSFT.US) $,$Amazon (AMZN.US) $,$Facebook (FB.US) $.

9. Telecommunication networks

The telecommunications industry consists of wireless operators, cable companies, internet service providers, and satellite TV companies, etc. Generally, the industry generates revenue from recurring consumer spending, but the industry is facing rapid change.

10. Materials

The materials sector includes discovery, mining, oil refining, chemicals, forestry and other related enterprises that contribute to the creation of new materials. As these companies are upstream in the supply chain, they are vulnerable to changes in business cycles.

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I'll be waiting for you for episode 8 tomorrow!

See you soon!!

Course link attached:“20 Lectures on US Stock Investment”