Indexes are a booming business. In addition to the broad U.S. market indexes we have detailed here, there are hundreds of indexes measuring various market sectors in the U.S. and around the world. International indexes measure the markets of various countries, regions and continents. We've described a few of the more notable international indexes here; they are but a snowflake on the iceberg of global stock market indexes. For a more comprehensive list of international exchange traded funds, see International Indexes at the American Stock Exchange website. Most major fund companies also offer international funds, but not all are truly index funds.
The British equivalent of the Dow Jones Industrial Average, the FTSE 100 (pronounced "footsie" and not to be confused with the game played by teenagers under restaurant tables) is an index of the top 100 most highly capitalized companies traded on the London Stock Exchange. A sampling of those companies includes British Airways, Cadbury-Schweppes, Rolls-Royce, and GlaxoSmithKline. Although the companies are British, they tend to conduct significant portions of their business outside of the U.K. FTSE is co-owned by the London Stock Exchange and the Financial Times. The organization has created a number of international and global indexes in the last several years.
|Number of Companies:||100|
|Scope of Market:||100 largest market capitalization companies based in the United Kingdom.|
|Percentage by Market Cap of All British Public Companies:||~70%|
|More information||FTSE website|
Started in 1964 (the same year that G.I. Joe was created in America), the Hang Seng was created as a measurement of the Hong Kong stock market. Today the index has 33 companies representing 70% of the market capitalization of the Stock Exchange of Hong Kong. These companies are grouped into four subindexes: Commerce and Industry, Finance, Properties, and Utilities.
|Number of Companies:||33|
|Scope of Market:||Taken from largest market capitalization companies based in Hong Kong.|
|Percentage by Market Cap of All Hong Kong Public Companies:||~70%|
|More information||Hang Seng website|
The most widely watched stock average in Japan, the Nikkei 225 was created in 1949. Since 1985, the index has been calculated every minute (wow, that means that in 15 years it has been calculated approximately 2,628,000 times!). It is a price-weighted index of 225 top-rated Japanese companies listed in the First Section of the Tokyo Stock Exchange. The calculation method is based on the same one used by the Dow Jones Industrial Average. These actively traded stocks are chosen from a pool of 450 companies with the highest liquidity. They are divided into six sectors based on industry and reflect the current trends on the Japanese market.
|Number of Companies:||225|
|Scope of Market:||Taken from largest market capitalization companies based in Japan.|
|Percentage by Market Cap of All Japanese Public Companies:||n/a|
|More information||Nikkei website|
Dow Jones Global Titans 50
|Top 10 Holdings of Global Titans 50|
|General Electric (GE)||10.76%|
|Exxon Mobile (XOM)||5.55%|
|AOL Time Warner (AOL)||2.87%|
|Intel Corp. (INTC)||2.07%|
|BP Plc. (BP)||1.84%|
Designed to include "only the largest and most-established blue-chip companies," the Dow Jones Global Titans tracks large international companies. All of the Global Titans do business around the world, but eight of the top 10 holdings in this index are US-based, so it appears that as long as a company is engaged in international trade, the global part is less important than the size of the company.
|Number of Companies:||50|
|Scope of Market:||The biggest of the big companies with international markets.|
|Percentage by Market Cap of All Japanese Public Companies:||~45|
|More information||Dow Jones website|
Sector indexes are constructed for the purpose of measuring how a particular industry or portion of the market is growing. Examples include Dow Jones U.S. Basic Material Index, the Morgan Stanley Internet Index and the Goldman Sachs Software Index. Investing in sector indexes required specialized knowledge of the industry. It's easy to go broke chasing the latest hot sector, since hot sectors change very quickly. Check out a mutual fund ranking service like Money Magazine or Morningstar.com offer. Both the top AND bottom funds are almost always sector funds. For a comprehensive list of sectors that can be traded via exchange traded funds (ETFs), see Sector Indexes at the American Stock Exchange website. Several major fund companies, most notably Fidelity, offer managed sector funds.
Investing in Sector and International Indexes
Our take on sector and international indexes is that they are very interesting, but not useful investing choices for anyone who doesn't have specialized knowledge of the industry or region. A broad-based global mutual fund is a far better choice for investors looking to add international diversity to their portfolio. The closest global exchange traded fund would be the Dow Jones Global Titans 50 Index.