If you are thinking to start trading in stocks or want to invest for the long period, then there are some things you should know before investing or trading. You should know how to invest and what tools you can use, like tools there are some other methods like Custom Index by which you can improve your financial status and with the help of Total Return Indices you can compare the performance of your funds. Once you know these methods you can enter the stock or trading market for trading very smoothly. As we know that stocks don't have fixed price, the price changes continuously every day, you should also you the daily status of the stock or trade in which you want to start trading or invest money. Let's learn more about these methods below in this article.
What is Custom Index?
The Custom Index is a statistical measurement of the changes in a group of stocks or traders which includes the performance of the company, productivity, and prices. Basically, with the help of Custom Index, you can track economic health from different aspects. There are many types of global financial indices like NASDAQ Composite and Global Dow which monitors the performance of selected big and powerful companies to calculate and envision the economic trends. You cannot invest directly in an index. All Custom Index which is related to the stock and trade markets has their own calculating methodology. The actual numeric value which is representing the index is not so important if we compared it with the relative change of an index. However, if you want to check that how the index has changed in previous days, you should look at the amount on which the index has fallen in the form of a percentage.
As you cannot invest in the Custom Index directly, the funds of the index are made to monitor their performance. These types of funds integrate the securities that are closely impersonating those found in an index and allowing investors to bet on its performance.
What are Total Return Indices?
These days mostly all fund houses have benchmarked their equity mutual funds schemes with simple price indices which show the change in the price of the stocks which are the main components of the index. All the paid-out dividends on the stocks and the price returns of the stock are accounted with the help of Total Return Indices and it is mostly used as a primary benchmark which is used for comparing the performance of different funds.
With the help of Total Return Indices, the returns of the index will increase up to 1-1.5 % every year. It is the type of equity index that monitors both capital profits of a group of stocks. With the help of Total Return Indices, you can see the perfect picture of alpha which is a metric which is used to measure what fund has earned and what was expected.
Author is an experienced person who is expert in calculating traditional market cap weighted, alternatively weighted equity indexes and Total Return Indices . To help you regarding trading, the Author also shares the method of Custom Index by which you can check all the changes that occurred in stocks.