Concept

Cap-weighted index

An index that weights each company by its total market value, so the biggest companies move it the most. The S&P 500 is cap-weighted; its equal-weight version gives every company the same share.

Why we track it

When a handful of giants lead, a cap-weighted index can set records while the average stock lags. Comparing it with the equal-weight version shows how broad a move really is.

Asset allocationHow a portfolio is split among kinds of investments, such as stocks, bonds and cash.
BacktestingTesting an investing rule on historical data to see how it would have performed before putting money behind it.
Basis pointOne hundredth of a percentage point (0.01%), often written bp.
Bear marketA fall of roughly 20% or more from a recent peak, usually over several months.
Bull marketA long stretch of rising prices across a market, often dated from a 20% rise off a low.
Business cycle stagesThe economy’s long rise and fall: years of growth, a slowdown, sometimes a recession, then recovery.

Why we track it

Related terms