Just like in the Indian stock market, stocks in the US market are classified into different categories based on their market capitalisation.
In this blog, we will discuss the classification of US stocks based on market capitalisation and explore three prominent US stock market indices: Nasdaq 100, S&P 500, and Dow Jones.
Understanding Market Capitalisation Categories
In the US stock market, companies are categorised into different market capitalisation groups:
- Small-cap companies: These companies have a market capitalisation ranging from $250 million to $2 billion. Examples include Andersons Inc. and Duo Lingo.
- Mid-cap companies: These companies have a market capitalisation ranging from $2 billion to $10 billion. Examples include MorningStar and Dropbox.
- Large-cap companies: These companies have a market capitalisation ranging from $10 billion to $200 billion. Examples include Netflix and McDonald's.
- Mega-cap companies: These are the largest companies with a market capitalisation exceeding $200 billion. Examples include Apple and Microsoft.
Nasdaq 100: Technology-Centric Index
The Nasdaq 100 is an index that includes the 100 largest and most actively traded US companies listed on the Nasdaq stock exchange. This index excludes financial stocks and focuses more on the technology sector. Some prominent companies listed on the Nasdaq 100 include Google, Microsoft, and Meta.
S&P 500: Broad Representation of US Companies
The S&P 500 is an index that tracks the 500 largest companies listed in the US stock market. It covers companies from various sectors such as technology, finance, healthcare, and consumer goods. The S&P 500 provides a broad representation of the market. Some notable companies listed on the S&P 500 include Apple, Domino's, and IBM.
Dow Jones Industrial Average: Benchmark Index
The Dow Jones Industrial Average is a price-weighted index that represents 30 major US companies. This index reflects market trends and the overall health of the economy. It has served as a benchmark index for investors for many years. Companies such as American Express, Coca-Cola, and Nike are listed on the Dow Jones Industrial Average.
Investing in US Stocks from India
Can one invest in US stocks from India? Absolutely! Investing in US stocks from India is legal and relatively straightforward. One popular way to invest is through Exchange-Traded Funds (ETFs). ETFs allow you to invest in indices such as Nasdaq 100, S&P 500, and Dow Jones.
The INDmoney app provides access to over 1,000 ETFs in the US stock market, making it convenient for Indian investors to participate.
Conclusion
Understanding US stock market indices is crucial for investors looking to diversify their portfolios and explore opportunities in the world's largest stock market.
By grasping the classification of stocks based on market capitalisation and learning about key indices like Nasdaq 100, S&P 500, and Dow Jones, investors can make informed decisions and gain exposure to the US market.