Page 51 - Introduction To Investment Management

return on specific investments. Each of the indices tracks the performance of a specific
“basket” of stocks considered to represent a particular market or sector of the stock

market. For example, the Dow Jones Industrial Average (DJIA) is an index of 30 “blue
chips” U.S. stocks of industrial companies (excluding transportation and utility

companies). Whereas the S&P 500 Composite Stock Price Index is an index of 500 stocks
from major industries of the U.S. economy. There are indices for almost every conceivable

sector of the economy and stock market.
Many investors are familiar with these indices through index funds and

exchange-traded funds (ETF) whose investment objectives are to track the performance
of a particular index. Instead of buying stock or stocks offered in exchange, investor also

may invest in indices or indexes as an alternative.

Index Funds - There are a variety of index fund companies and types
to choose from, including international index funds and bond index
funds. An index fund is a type of mutual fund with a portfolio
constructed to match or track the components of a market index,
such as the Standard & Poor's 500 Index (S&P 500). An index mutual
fund is said to provide broad market exposure, low operating
expenses and low portfolio turnover.

Exchange-traded fund (ETF) - This is a security that tracks an index
and, like an index fund, represents a basket of stocks but, like a stock,
trades on an exchange. You can buy and sell ETFs just as you would
trade any other security. The price of an ETF reflects its net asset value
(NAV), which considers all the underlying securities in the fund.
Source: Investopedia

The same scenario happens in our local market hence, Bursa Malaysia has several
indices, providing investors with a comprehensive set of data which measures the

performance of the major capital and industry segments of the Malaysian and regional
markets.

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