What is the ASX 200 and more importantly, what is inside
3 Key Takeaways
- What is the ASX200
- How has it performed
- What stocks are inside
2 minute read
For those who like to watch the evening news, right before the sport and weather updates, comes the finance report. One term that you commonly hear is reference to the ASX 200 and whether it went up or down throughout the day. To most Australians, this means absolutely nothing. Just another piece of jargon in the world of endless finance jargon. However, to every smart investor and financial planner, the ASX 200 is a representation of the top 200 companies in Australia. Given that there are over 2000 stocks currently listed on the Australian Stock Exchange. The ASX 200 can be seen as an indicator of how the overall Australian Stock Market is performing at any given time. The ASX 200 has performed quite strongly over the last 10 years with an average return of over 9% per a year.
However, most investors do not realise the ASX 200 does not actually represent the top 200 companies in Australia equally. Due to the nature of the ASX being a float adjusted market cap, which means that companies are based and represent on their size. So, the larger the company, the bigger the representation within the ASX 200.
This results in 40% of the ASX 200 being represented by only 10 companies, with only 1 company Wesfarmers being outside of the banking, mining resource and pharmaceutical industry. The remaining stocks is a mixture of the big 4 banks, Rio Tinto and BHP plus CSL.
From an investment perspective, if you invested $1,000 dollars into the ASX 200. $400 dollars will be invested in approx. 10 stocks, with the remaining $600 sprinkled across the remaining 190 stocks. Although the ASX 200 looks quite diversified, unfortunately in reality it is not.
Please speak to one of our financial advisors who service the Yarraville, Seddon, Williamstown, and Altona areas if you wish to know more.
