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After I have talked you through many, many, many indices in various countries and on various continents, we need to draw some conclusions to actually make all of this worthwhile.

The main criteria for the list will simply be the medium-term growth rate (I consider 5 years to be medium-term since long-term investing is usually assumed to be > 10 years). The 5 year span should be sufficient to expose a growth trend, but there’s obviously no guarantee - especially if you’re looking at countries like India, which have become very fashionable in the last few years. If you remember the last “fashion trend” and what happened (I’m talking dot.com bubble…), you should know what I am talking about. On the other hand, most of you will be young and far away from retirement, so there’s nothing wrong with a little risk in your investment - if you’re that sort of person.

So here we go - the Top 5 indices of the “What are we tracking” series:

1. India - BSE Sensex (BSE 30): 5 year growth rate of 400.88%
2. UK - FTSE Fledgling: 5 year growth rate of 126.66%
3. UK - FTSE 250: 5 year growth rate of 92.65%
4. Hong Kong - Hang Seng: 5 year growth rate of 90.28%
5. Spain - IBEX 35: 5 year growth rate of 84.53%

I don’t know about you, but I’m quite impressed with these numbers. Most of them would have doubled your capital since 2002! The next challenge, however, is going to be to find index funds that are actually tracking these indices. I will keep you posted on my research, but you are obviously more than welcome to share your experiences and/or tips with the rest of us in the comments!

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Enjoy part 2 of the selection of European indices that might be considered as base indices for a tracker (index) fund.

• Spain: The IBEX 35 is yet another capitalisation-weighted stock market index which includes the 35 most liquid Spanish stocks traded on the Bolsa de Madrid. It grew by a solid 84.53% within the last 5 years.

• Sweden: Sweden’s main stock index is the OMXS30, which consists of the 30 most traded stocks on the Stockholm Stock Exchange. The OMXS30 is market-value-weighted as opposed to the more common capitalisation-weighted indices we’ve encountered so far. Companies represented by the index include AstraZeneca, Ericsson, H&M, Nokia and Volvo. Contrary to my expectation, IKEA is not among them… The index grew by 54.41% since its inception in July 2004, i.e. in under 3 years.

• Norway: The Oslo All-Share Index (OSEAX) is a market-capitalisation weighted index consisting of all shares listed on the Oslo Stock Exchange. Its base value was set to 100 in December 1995 and it is currently priced at 527.40. Of this overall growth, 31,74% can be attributed to the last 5 years.

• Denmark: The OMX Copenhagen 20 is the top-tier stock market index of the Copenhagen Stock Exchange and is a market-value weighting of the 20 most traded stocks. It grew by 53.76% since April 2002.

• Switzerland: The SMI (Swiss Market Index) is Switzerland’s blue chip index and therefore the leading index in Switzerland. It consists of the 30 largest and most liquid stocks listed on the Swiss Exchange (SWX) and represents ~90% of the total market capitalisation of all Swiss and Liechtenstein equities on the SWX. Companies like Merck, UBS and Nestle are among the companies currently tracked by the SMI. The index was introduced in June 1988 at a baseline value of 1500 points and is currently traded at just under 9,200 points. 71.78% of the growth occurred within the last 5 years.

The final selection of Asian indices will follow shortly before I’ll return to the original series on Investment Choices.

Read part 5 of “What are we tracking?” on Asian indices >>

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I have already mentioned how important diversification is in order to minimise the impact that one sector’s / index’s performance can have on your overall returns, and by examining stock indices abroad I’m hoping to provide you with a decent selection of possible indices to invest in.

This time I will have a look at European indices, but since there are plenty of countries to choose from, I will only look at one key index per country. Despite this restriction I felt that you might be overwhelmed by too much information at once (and let’s not forget I’ve got finals in 3 weeks…) which is why I have divided the topic into two posts.

If there is any (European) country you are particularly interested in and that I haven’t mentioned, please leave a comment or start your own research here or here.

• Belgium: The BEL20 is the main stock index for the Euronext Brussels. The shares represented by the index are chosen by the Euronext market authorities based on criteria like market capitalisation. There is a striking dominance of financial companies which represent about 40% of the index’s market capitalisation, compared to a weight of < 8% given to technology- and telecom-related shares. The index has experienced a growth of 64.32% in the last 5 years.

• France: The main French benchmark index is the CAC 40, which is a capitalisation-weighted measure of the 40 most significant values among the 100 highest market caps on the Paris Bourse. It was started at a base value of 1,000 in December 1987. The companies represented in the CAC 40 are mainly multinational companies which means that despite their French origins about 45% of the shares are owned by foreign investors. Companies included in the index are for example AXA, BNP Paribas, Carrefour or Renault. The index has gained 27.14% within the last 5 years.

• Germany: The Xetra DAX is the most important stock index in Germany. It is a blue-chip index consisting of 30 major companies trading at the Frankfurt Stock Exchange. Companies represented by the index include Adidas, BASF, BMW, Daimlyer Chrysler, Deutsche Bank, Lufthansa and SAP, all of which have contributed to a growth of 35.15% in the last 5 years.

• Italy: The S&P MIB is currently Italy’s most important stock index and lists the 40 most largely-capitalised stocks traded on the Borsa italiana. It has been commonly used since September 2004 when it replaced the MIB 30. The index grew by 30.64% within the last 5 years.

• Netherlands: The Amsterdam Exchange Index (AEX) is a stock market index that is composed of the 25 largest companies that trade on the Euronext Amsterdam. The maximum weight any company can have within the index is restricted to 15%. ABN Amro, Philips and Unilever are just a few of the many well-known companies represented by index, which experienced a huge fall in 2002. Therefore the overall growth for the last 5 years is currently only 1.39% even though it grew by 48.41% within the last three years.

• Portugal: The Portuguese Stock Index (PSI 20) lists the 2o largest and most liquid share issues from all companies on the Portuguese stock market. The constituent weights are limited to 20% of the index capitalisation. The PSI 20 experienced a growth of 54.56% in the last 5 years.

The next post is going to cover Spain, Switzerland and the Scandinavian countries in the North who are usually known for their great economic strength - I’m curious whether that’s reflected in the growth rate of their stock indices!

Read part 4 of “What are we tracking?” for more European indices >>

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