What is the ASX 200?
Selfwealth
What is an Index?
The ASX 200 is an Australian share market index.
Taking Investopedia definition of a market index, we end up with this somewhat simple explanation:
"A market index is a hypothetical portfolio of investment holdings, which represents a segment of the financial market. The calculation of the index value comes from the prices of the underlying holdings".
Therefore, an index is a tracker of a group of assets.
The name of the index typically describes what it is tracking. So, the ASX 200 is effectively tracking the Australian Security Exchange's (ASX) top 200 companies.
When measuring the performance of the Australian share market, this is what people will typically be referencing. There is also the All Ordinaries Index, which you will sometimes hear about on the news. This index tracks the top 500 companies.
How are the Top 200 Chosen?
The top 200 are not based on revenue or the number of employees. It is based on market capitalisation, which is the current value of the company according to the number of shares issued, and the current share price.
How to Buy All 200 Companies in One Transaction
It would take a while, and cost a lot in brokerage to buy shares in each of the top 200 companies on the ASX. However, you can do this easily by buying an ETF that simply follows the ASX 200.
Read more about what is an ETF.
There are also many ETFs that track other indexes, including a technology index, an ESG index, a resources index, and so forth.
Each trade on Selfwealth costs just $9.50, regardless of how many units in the ETF you buy, or sell.
ETFs that track the ASX200
State Street Global - SPDR S&P/ASX 200 Fund (ASX: STW)
iShares (Blackrock) - iShares S&P/ASX 200 ETF (ASX: IOZ)
Betashares - Betashares Australia 200 ETF (ASX: A200)
Of the above, the Betashares A200 ETF is the ETF with the lowest management fee, at 0.07%.
The management fee is not something you have to worry about paying. It is deducted from the assets of the fund and is paid to the fund manager. With that said, it is a cost to your investment, so it is essential to consider this fee.
You can see a full list of the ASX 200 companies on this handy page.
Selfwealth Indexes
The Selfwealth community is made up of over 129,000 investors. We use those portfolios to make our own indexes.
If the ASX 200 follows the top 200 companies, why not follow the top 200 investors instead? Or the top 10 ETFs as ranked by popularity? Maybe the top 10 companies held by the top 20 investors?
You can view each of these, and more, by signing up to Selfwealth Premium, and going to the ‘members’ page. If you don't already have a Selfwealth share trading account, join today!
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