Standard & Poor’s 500 (S&P 500)
A type of benchmark based on the market capitalisation of the top 500 companies. The S&P 500 is closely followed because it lends a fairly accurate portrayal of the current status of the overall market. Some investors choose to move exclusively within these stocks for the lower level of risk they offer. It is not uncommon to find retirement funds or mutual funds with holdings weighted towards companies in the S&P 500 index.
Dow Jones Industrial Average (DJIA)
The DJIA, created by Charles Dow, is a compilation of 30 significant stocks that are traded on the NYSE. Just as the economy changes so does the index, if a company experiences financial problems and is no longer a good representation of the overall economy, the Dow could remove the company from its index. Disney, Goldman Sachs, and Boeing are some examples of companies that are typically in the DJIA.