Broad Based Index

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Definition: Broad Based Index

Broad Based index is an index which is premeditated to predict the movement of the stock market. The Dow Jones Industrial Average is the smallest broad-based index consisting of 30 industrial stocks. The BSE sensex also is a broad based index.

For example: The Wilshire 5000 consisted of 5,000 stocks in the year 1974, when it was created but gradually expanded since then. Wilshire 5000 Index comprehensively takes the all-inclusive approach by comprising the shares which are listed on the NYSE and most of the stocks that are listed on the NASDAQ and American Stock Exchange.

The S&P is composed of 500 companies which are collectively considered a true indicator for the US stock market, which are based on the sectors the companies operate in, positions which the companies command within the industry, and their market cap. S&P 500 is a market-weighted index. Therefore just 10% if its parts add to about 75% of the value. The Value Line Composite Index structures an in between approach by tracing around 1700. The Value Line Composite is considered to be a better gauge of speculative stocks than that of other more stable stocks.

Hence, this concludes the definition of Broad Based Index along with its overview.

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