The ins and outs of market indices

Stock market indices change more than you might imagine – despite their iconic image.

The well-known Dow Jones Index consists of a select group of 30 companies. General Electric (GE) was a founder member in 1896 and, until late June, the company had been a continuous Index member for over 110 years. Now it has been replaced by Walgreen Boots Alliance, a pharmaceutical retailer.

In the same month that GE and the Dow Jones Index parted company, MSCI, another leading index provider, made some important announcements to its key Emerging Markets Index (EMI).

In June, a first round of Chinese mainland shares (A shares) were added to the Index. Further adjustments to the EMI are scheduled for 2019:

  • Saudi Arabia will be included, to make up approximately 2.6% of the Index.
  • Argentina will return to the Index, having been demoted in 2009.

UK markets

FTSE Russell undertook its quarterly review of the FTSE 100 Index in June. It was expected that Marks & Spencer (M&S) would be replaced by the online-only grocer, Ocado. Ocado did enter the FTSE 100, but M&S survived for another three months.  

Whether you hold index-tracking funds or active funds which try to beat their benchmark index, June’s changes are a reminder that indices are by no means fixed. Let us know if you would like to discuss your investments in light of these changes.

The value of your investments, and the income from them, can go down as well as up and you may not get back the full amount you invested.

Past performance is not a reliable indicator of future performance.

Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.

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