After the turn of the year is not long ago we went through, is a good time in doing the review for all activities that are conducted throughout the year, including investment activity. Events both positive and negative, will ultimately impact on the rate of return (return), the investment is obtained by the investor.
Many questions are critical and need to be answered so that investors really know whether the investment has been working effectively, or even vice versa. Some questions to ask of others such as: What is my return on investment is sufficient? How effective investment strategies that have been executed?
From the answers obtained, then the investor will know that the investment strategy remains the right path or not. Thus the investor will have a strong foundation in making a better investment decisions in the future.
To answer these questions certainly needed a benchmark or reference to the objective as a comparison of the returns from investment activities that have been implemented. A comparison between an objective measurement tool, available on the market and can be accessed by investors is the index. Yes the index, therefore, let us discuss more about the index in relation to the investment world.
Know the Index
Financial and capital market we know the term stock price index, although the index is not monopolized by the stock market only, but also used in many other markets such as the bond market and the forex market. It is actually not surprising because the first index that is used in financial and capital markets, is the stock price index. Is the Charles H. Dow, a journalist financial pages, which became the first person to introduce the use of indices to monitor stock prices in the U.S. in 1896.
The introduction of the index was the forerunner of the Dow Jones Industrial Average (DJIA), a stock price index is referred to by many of the world's financial players to date.
The index itself is a statistical indicator that shows the size change of a particular object. Stock price index will give an idea of the size of the change in stock market prices in a given period. Idea of how large the bond market moves up or down can also be obtained by observing the size of the change in bond price index figures.
An index number is generated from a series of calculations that relate the price today with the price of previous day, so it can increase his price today is higher or lower than the previous day.
By combining the methodology of calculation of the index with a choice of capital markets and financial instruments are included in the calculation, then the index is expected to provide an accurate picture of the condition and direction of movement of the current market in an investment instrument.
All figures are indexes always start from the number 100. Thus, by knowing the index number of the last, easily known how much of the increase or decrease in market value of which is described by the index itself.
Index as a benchmark investment evaluation
From the above explanation can be concluded that the index of the world's financial and capital markets is an indicator of a change that could give an idea of what is happening on the market. Thus we can answer the critical questions posed at the beginning of my article.
Armed with the index, which is an objective measure as a reference or comparison of investment results have been obtained, it will be success or failure of an investment strategy can be measured objectively.
Index as a monitor
Investors in the illustration above picture, in fact do not wait until the end of the year in evaluating the investment activity. Because the index is also an indicator that is quite effective in helping investors to monitor the investments being made at regular intervals.
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