How do share markets work?
There are many asset classes you can invest in, and shares are just one type that you might find in an investment portfolio. But what are shares, and how do they work?
What is the ASX 200 or the S&P 500?
To track the performance of investments over time, investors use a benchmark or index. A benchmark serves as a standard against which the performance of a specific asset class is measured.
There are hundreds of benchmarks that correspond to different share markets. Two that are commonly quoted in the media include the ASX 200, which is the official benchmark for the top 200 stocks listed on the Australian share market, and the S&P 500, which tracks the performance of the top 500 stocks listed on the United States stock market. Benchmarks help investors understand how share markets are performing generally.