Indexes are all around us. Take any product or service and it�s liable to be the subject of some index or other. With regard to stock markets, trading price indexes, which chart the rise and fall of groups of shares, are the most obvious and useful reference.

You only have to run your eye down a list of share prices to know how the market is performing. Red numbers mean negative figures while black or blue mean positive. This is unquestionably the simplest and quickest way to know at a glance how shares are doing. But besides this figure there are dozens of keys to interpreting market charts.

A textbook definition of an index would be a statistical instrument which represents in an abbreviated and simple way -in a single average number-, multiple changes in a phenomenon defined by standardised characteristics over a certain period.

Indexes may refer to subgroups, in which different references allow you to gain a better understanding of a set of actions. Usually the subdivisions are composed of a specific type of company, such as the Ibex-35, which groups together the 35 companies with the highest market capitalisation on the Spanish stock market; the New York stock market�s Dow Jones Index or the Nasdaq, which lists the share prices of the main companies in the new economy sector (mainly Internet and IT).

 

Among the other indexes around the world are: the French CAC 40; the British FTSE; the German GDAX; the Italian MIB 30; the Belgian BEL 20; the Dutch AEX; the Brazilian Bovespa; the Swiss Market; the Portuguese PSI; the Mexican IPC; the Chilean IPSA and the Nikkei from Japan.

 

Keys to investment fund rankings
As in the case of stock market charts, there are some more or less universally accepted codes used by the investment community which you will need to know to be able to interpret the information found in investment fund charts. Here are the most important terms:

Order
Fund managers are always listed in alphabetical order, and the different funds of an individual manager are similarly listed alphabetically.

Ranking
The yield ranking for each type of fund is established according to the accumulated yield in a year. The first number refers to the position the fund occupies within its group, and the number in brackets is the total number of funds listed within that particular family of funds.

Group
Next to the fund�s name is a code which identifies the group it belongs to. Thus, in Spain, F means Fixed Income; V, stands for variable income (equity); D, is a money market fund; H is an international fixed income; B is international equity; I is an international mixed fund; M is a mixed fixed income fund; K is a protected fixed income fund; G is a fund of funds; L is a protected equity fund; C is a protected fund pegged to international indexes; R is a mixed equity fund and J is an international money market fund.

Yield
This variable is measured in one or three year terms and indicates how much a particular fund has earned since the reference date.

Volatility
This is a measure of the risk of a fund. This index measures the fluctuations in yield for each fund, usually compared to its one or three year average yield.
Premium
Is a surplus (+) or lack (-) of yield of a fund in one or three years, with respect to the performance expected from its volatility. If volatility is the measurement of the risk factor of a fund, the premium represents the remuneration or reward for taking on that risk.
When a fund�s premium is positive it means that it is performing better than expected given its volatility. Conversely, when the premium is negative this means that the yield obtained by the fund, which may be positive, is nevertheless below what it should have earned in relation to its level of risk.