What is the IBEX35?
1.- What is a stock index?
The IBEX 35 is the Spanish stock market index. To understand what the IBEX 35 is, we first have to explain what a stock index or simply an index is.
There are companies that are listed on the Stock Market such as Banco Santander or Inditex and companies that are not listed on the Stock Exchange such as Mercadona, El Corte Inglés or Mango. The price of the shares of a company, such as Inditex, expresses the market capitalization of the company listed on the Stock Exchange. This stock price changes constantly.
AStock indexor index, on the other hand, not only represents a company but amarketand a market is always composed of several companies. Markets can be of many different types. Geographic markets such as Spain, Europe or the United States. Markets of sectors such as the financial sector, the technological sector or the textile sector or product markets: stock markets also called equity markets, bond markets also called fixed income markets or commodity markets.
2.- What is the IBEX35?
If we talk about the Spanish market, we include, in addition to the shares of our Inditex, the shares of the banking sector: Banco Santander, BBVA or values of the telecommunications sector such as Telefónica. All the companies together form an index. That index represents the market value. The reference index of the Spanish market is the IBEX 35.
The IBEX35 is based on the Madrid Stock Exchange
HeIBEX 35 represents the value of the 35 largest Spanish companiesthat are listed on the stock market. Companies are weighted differently within the index. For example, Bankinter, which has a weighting of 0.94%, or Iberdrola and Inditex, which with 17 and 11.5% are the heavyweights of the IBEX 35.
IBEX35 weighting March 2021
Source: Spanish Stock Exchanges and Markets. own elaboration
The company "Bolsas y mercados españoles" with its acronym BME is in charge of determining which companies make up the IBEX 35 and, as in football, companies can rise to the IBEX 35 or fall from the IBEX 35. The second division of the Spanish market indices is heIBEX Mediumwhich is composed ofThe next 20 largest companiesthat are listed on the stock market. Then comes the third division of the Spanish market indices, theIBEX Small, which in turn is composed ofthe next 30 largest companiesthat are listed on the stock market.
In 1992, BME created the IBEX 35 with a base value of 3,000 points. Since then it has grown by more than 205% and is currently in May 2021 close to 9,100 points. It is the most important stock market index in Spain and is closely watched by the media and investors.
3.- Other stock indices
There are thousands of stock indices in the world. Within the European framework, one of the most followed indices is theDAX, with characteristics similar to the IBEX 35 and which was created four years before the IBEX 35, in 1988 with a base value of 1000 points. Today it is above 15,400, that is, it has grown more than 1,440% throughout its history.
In the United States, two of the most important indices are theS&P 500and theNasdaq-100created in 1957 and 1985 respectively and with growth of approximately 9,000% and 10,000% since its creation. There are also global indices such as theMSCI Worldcontaining more than 1,600 of the largest companies in developed countries. This index was created in 1969 with a base value of 100 points and is currently at 2,900 points, in other words with a growth of 2,800%.
4.- How can you take advantage of the evolution of the indices?
There are basically two possibilities for this: one is withETFsand the other withinvestment funds. By clicking on the words in red you will access the brief explanation of each one of them.
Now that you know what the IBEX 35 and the stock indices are, we would like to know your opinion. If you have questions about the IBEX 35 or want to add something, write us below in the comments.