What is Dow Jones and S&P 500?

New York Stock Exchange (NYSE) Thousands of publically traded companies are listed here. Companies sell, and others buy stocks in companies (making you a partial owner of the company).

In theory as the company does well, the stock increases, and you can sell it and make money, if it bombs, the stock drops and you loose money. (not too unlike gambling).

Many economists, or economic analysts, make predictions and statements about our economy from information known as "Dow Jones", sometimes you may also here of "S&P 500".

But to do know what these things actually are? Some people equate "Dow Jones" as just another word for the New York Stock Exchange (NYSE).

Dow Jonies -> A stock statistics company. They track about 30 of the biggest companies on the NYSE and use a math formula which creates a value known as "points" which basically specfiy how the market is doing

S&P 500 -> Another statisics company. It basically does the same things as dow jones but has 500 companies so the results maybe more accurate.

The important lesson:

When you hear things on the news stating the Dow Jones has dropped 500 points, or gained 1000 points or whatever it's doing at this moment. It is tracking only about 30 companies (some of the biggest). If one or more of those companies does bad, the points drop, if they do good the points raise, but it doesn't really mean a lot; it doesn't mean the sky is falling.

Just some food for thought!