Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Composite

What it is:

A composite is a grouping of securities, indexes or other items.

How it works (Example):

One of the most well-known composites in the finance world is the Dow Jones Composite Average, which is  a price-weighted average of the 65 companies that compose the Dow Jones Industrial Average, the Dow Jones Transportation Average, and the Dow Jones Utility Average. The index is price-weighted, meaning that the stocks with the highest prices have the most influence on the index.

Why it Matters:

Composites are broad measures and usually a convenient way to evaluate the performance of a wide array of securities, other indexes or other items. For instance, the Dow Jones Composite Index gives a good indication of the overall direction of the largest companies in the United States: It includes some of the titans of the transportation, utility, financial services, technology, retail, entertainment and consumer goods industries. As such, the index is not just a measure of market performance; some consider it an economic indicator as well.