Commonly Benchmarked Indexes

The construction and composition of an index are important factors that affect ETF performance. The number of market indexes continues to expand, and this is only a partial list.

Broad Market Indexes

Morningstar U.S. Market Index

This index represents 97% of the U.S. equity market, and it seeks to approximate the returns of the broad U.S. market. The index's total 10-year annualized returns are 2.07%, one-year returns are 23.95%, and the median market cap of companies included in the index is $2.95 million, according to the Morningstar website.

Dow Jones U.S. Total Market

This index is a broad measure of the U.S. equity market, and it seeks to approximate the returns of 95% of U.S. float-adjusted market capitalization.

Dow Jones Wilshire 5000

This index is a broad measure and a leading proxy of the total U.S. equity market. It's composed of approximately 5,000 publicly traded stocks of all market capitalization sizes, but excludes bulletin-board issues. Two versions of the index are maintained. One is weighted by full market cap size, whereas the other is weighted according to a float-adjusted market cap.

Russell 3000

Composed of the 3,000 largest U.S. companies based on total market capitalization, this index represents approximately 98% of the investable U.S. equity market.

FTSE RAFI US 1000

This broad market index selects stocks based upon fundamental measures. The four criteria used are book value, sales, income and dividends. One thousand stocks are assigned with the highest fundamental strength then ranked and weighted according to their score. Components are rebalanced and reconstituted annually.

Large-Cap Indexes

Morningstar Large-Cap Index

This index pulls the stocks with the highest market capitalization from the Morningstar investable universe. Morningstar cap-weighted indexes do not overlap, so the companies represented in this index will not appear in mid- or small-cap indexes. The median market cap of companies included in the index is $23.5 million, according to the Morningstar website. Morningstar indexes are rebalanced quarterly. Companies in this index trade on the Amex, NYSE and NASDAQ.

Dow Jones Industrial Average

First published in July 1884, 'The Dow' has become a longstanding gauge of U.S. stock market performance. Unlike market cap weighted indexes, the Dow Industrials are price weighted. This means companies with the highest stock price will have the greatest influence on index performance. The Dow represents shares of 30 of the largest publicly traded U.S.-based industrial companies. The index is maintained and reviewed by editors of the Wall Street Journal.

Russell 1000

This domestic index measures the performance of U.S.-based large-cap growth companies. It screens for companies with higher forecasted growth and price-to-book ratios within the Russell 1000. The index is market cap weighted, float adjusted and is reconstituted annually.

S&P 500

Widely regarded as the best gauge of the U.S. equities market, this popular index includes a representative sample of 500 of the largest companies by market capitalization in segmented industries of the U.S. economy. Although the S&P 500 is weighted toward large-caps, it's also a useful barometer for the total market.

Mid-Cap Indexes

Morningstar Mid-Cap Index

This index selects stocks in the mid-cap universe that exhibit value characteristics and meet certain liquidity requirements. Morningstar cap-weighted indexes do not overlap, so the companies represented in this index will not appear in large- or small-cap indexes. The median market cap of companies included in the index is $4.7 million, according to the Morningstar website. Morningstar indexes are rebalanced quarterly. Companies in this index trade on the Amex, NYSE and NASDAQ.

Russell Mid-Cap

This index measures the performance of the 800 smallest companies in the Russell 1000 Index. As of the latest reconstitution, the index had a total market capitalization range of approximately $1.2 billion to $9.8 billion.

S&P Mid-Cap 400

This index is part of the S&P series of U.S. market indexes that measure companies with a mid-cap profile. Today, mid-caps are recognized as an independent asset class, with risk/reward profiles that differ considerably from both large-caps and small-caps.

Morningstar Mid-Value

This is one of nine style box indexes offered by Morningstar. It selects stocks in the mid-cap universe that exhibit value characteristics and meet certain liquidity requirements. Companies in this index trade on the Amex, NYSE and NASDAQ.

MSCI U.S. Mid-Cap 450

This domestic index measures the performance of 450 U.S.-based mid-sized companies. Mid-caps are generally defined as companies with a market capitalization size between $2 and $10 billion. This index is rebalanced quarterly.

Small-Cap Indexes

Morningstar Small-Cap Index

This index captures the performance of smaller companies with good liquidity. Morningstar cap-weighted indexes do not overlap, so the companies represented in this index will not appear in large- or mid-cap indexes. The median market cap of companies included in the index is $1.4 million, according to the Morningstar website. Morningstar indexes are rebalanced quarterly. Companies in this index trade on the Amex, NYSE and NASDAQ.

Russell 2000

This domestic small-cap index measures the performance of the 2,000 smallest companies in the broader Russell 3000. The index is market cap weighted, float adjusted and its reconstituted annually.

S&P Small-Cap 600

U.S. small companies, which represent 3% of the U.S. equity market, are the focus of the S&P 600. Small-caps are generally defined as companies with a market capitalization size under $2 billion. Stocks are screened by an S&P committee for liquidity and industry group representation. This is a market cap weighted index and the reconstitution of components is ongoing.

Industry & Sector Indexes

Morningstar Sector Indexes

Morningstar divides the market into 11 distinct sectors: Basic Materials, Consumer Cyclical, Financial Services, Real Estate, Consumer Defensive, Health Care, Utilities, Communication Services, Energy, Industrials and Technology.

Dow Jones U.S. Healthcare

This index is composed of leading U.S. companies within the health care sector of the economy. Ranging from biotechnology companies to long-term care facilities, the index is designed to provide broad diversification within all sub-sectors of the health care industry.

MSCI Information Technology

This sector index consists of domestic technology stocks with large, mid and small cap orientations. Key technology segments represented are data processing, hardware, semiconductor and software. Cisco Systems, IBM, Microsoft and Google are among top holdings. The index has just over 400 components.

Wilshire REIT

This real estate investment trust index (REIT) seeks to provide an effective representation of the U.S. REIT market. It's comprised of companies whose charters are the equity ownership and operation of commercial real estate and that derive a minimum of 75% revenue from these activities.

WilderHill Clean Energy

This equal weighted index selects publicly traded companies that develop and use renewable energy sources, environmentally friendly power and technologies that facilitate clean energy production. Components are rebalanced and reconstituted quarterly.

Fixed Income Indexes

Lehman Brothers U.S. Aggregate Bond

This index measures performance of the U.S. investment-grade bonds market. Underlying components include only investment-grade quality U.S. government bonds, corporate bonds, mortgage-backed and asset-backed securities. The index components must be fixed rate, nonconvertible, taxable and denominated in U.S. dollars.

Goldman Sachs $ InvesTop Corporate Bond

The Goldman Sachs $ InvesTop is a basket of 100 bonds rebalanced monthly and designed to provide balanced representation of the U.S. dollar investment grade corporate market. All 100 bonds in the basket are equally par-weighted.

iBoxx $ Liquid High Yield Index

This corporate bond index is composed of 50 holdings with a weighted average maturity of 7.5 years. S&P's average credit rating on individual bond holdings is B+, and Moody's is B1. Corporate debt is diversified across many industry sectors including consumer services, health care, technology and utilities.

Global & International Indexes

MSCI EAFE

Morgan Stanley Capital International developed the EAFE index as a performance benchmark for international stocks. The market cap weighted index is composed of publicly traded stocks in 21 developed countries in the European, Australian and Far East markets. Among countries that represent the top 10 positions are Japan, Germany and the United Kingdom. The index is rebalanced quarterly.

S&P Europe 350

This index has broad market exposure to approximately 70% of Europe's market cap spanning 17 different stock exchanges.

FTSE/Xinhua China 25

Like other country indexes, this index has a singular focus on just one nation: China. Its principal purpose is to provide market exposure to China's largest and most liquid publicly traded companies. Index components are weighted according to their market value. Each holding is also a member of the FTSE All-World Index.

Emerging Market Indexes

S&P BRIC 40

This indexrepresents four emerging equity markets. It includes highly liquid securities from Brazil, Russia, India and China, which together are known as the BRIC countries. This index includes 40 large and liquid stocks that trade in developed market exchanges: Hong Kong Stock Exchange, London Stock Exchange, NASDAQ and NYSE.

 

MSCI Emerging Markets

Morgan Stanley Capital International developed this index to track the equity performance of emerging markets. This market cap weighted index is composed of publicly traded stocks in 21 emerging countries. Among countries that represent the top 10 positions are Brazil, India and South Africa. The index is rebalanced quarterly.

Commodity Indexes

Deutsche Bank Liquid Commodity

This index tracks a small basket of six commodities using long futures contracts. The amount invested in each of these commodities is weighted and reset annually in the following manner: 35% light, sweet crude oil; 20% heating oil; 12.5% aluminum; 11.25% corn; 11.25% wheat; and 10% gold.

S&P GSCI Commodity Index

The commodities in this index are production-weighted to reflect their relative significance to the world economy. Twenty-four different commodities are represented including corn, gold, live cattle, oil, natural gas, soybeans and wheat. Crude oil dominates the index's weighting.

Social Indexes

KLD Select Social

Companies with positive social and environmental characteristics in the large cap universe are the principal components in this index. KLD handpicks 250 to 350 companies from a pool of stocks within the Russell 1000 and S&P 500 indexes. Each company is assigned a score and weighted accordingly. Companies with higher scores have greater index representation than those with lower scores. Tobacco stocks are excluded from this index.

Specialty Indexes

Intellidex Indexes

Developed by the American Stock Exchange, this series of indexes are comprised of U.S. companies in the large-cap, mid-cap and small-cap area. Each respective index seeks to identify stocks that have capital appreciation potential using a proprietary stock selection and portfolio construction methodology.

S&P 500 Equal Weighted Index

The S&P Equal Weight Index (S&P EWI) is comprised of the same stocks that make up the S&P 500, but gives equal representation to each component. This eliminates a bias to companies with the largest market capitalization. The index is rebalanced quarterly.

U.S. IPOX 100 Index

This index is designed to track 100 new companies or initial public offerings (IPOs). The index uses a rules based value-weighted system which measures the average performance of U.S. IPOs during the first 1000 trading days. Stocks are selected based on quantitative screens and are reconstituted and adjusted quarterly.