ETF Basic

Investing in stocks isn’t just about making money—it’s a gateway for investors to enter the financial world. For newcomers, understanding the stock market index is one of the first steps in navigating markets, companies, and industries. Let’s explore the stock market index and why you should invest in ETFs with KIS Prime.

1. What is the stock market index? 

• A stock market Index is a visual chart representation of price changes in the stock market, reflecting the performance of specific groups of stocks or industries. Indices offer a broad perspective on the market’s health, enabling investors to understand fluctuations and make informed decisions about buying or selling stocks. When the index rises, it indicates a developing and robust market, while a decrease predicts potential challenges. Explore common indices like VN-Index, S&P 500, Dow Jones, etc depending on the trading fields and country.
• For example, VN-Index is a key index tracking of all HOSE exchange’s stocks in the Vietnamese market.

Source: Investing.com

• On November 15, 2022, the VN-Index witnessed a significant drop to 922.94 points, marking a period of market volatility. Over a year later, on December 15, 2023, the VN-Index saw a slight increase to 1102.39 points, equivalent to a 19.43% rise. The VN-Index’s movement as a compelling narrative, illustrate the picture of the domestic stock market’s situation.

2. Types of Stock Market Index?

Stock indices are typically classified based on the market of each country, industry, or geographical region. Here are 3 stock indices investors should know:

1. 1. Benchmark Indices: act as reference points, and evaluate how a country’s stock market, a specific investment portfolio, or individual stocks are performing. The indices comprise a curated selection of high-performing stocks, providing insights into market volatility and trends. Examples:

   • VN-Index (Vietnam): The main index of the Vietnamese stock market, reflecting the price movements of all listed stocks on the Ho Chi Minh Stock Exchange (HOSE).
   • S&P 500 (USA): A benchmark index representing a significant portion of the US stock market, comprising 500 leading companies and representing the US economy.

2. 2. Sectoral Indices: focus on specific industries, offering a snapshot of economic performance within the same business category, providing a closer look at how companies within a particular industry are faring in the market. Example:

   • VNFIN SELECT INDEX: An index spotlighting 10 key stocks in Vietnam’s financial sector—securities, banking, and insurance, carefully chosen from the VNAllshare Financials index,  providing detailed information and evaluation of the financial sector’s performance in the Vietnamese stock market.

3. 3. Market-Cap-Based Indexes: indices weigh companies based on their market capitalization, where larger companies have a more significant impact on the index.Examples:

   • VN30: Primarily focusing on 30 stocks with significant influence on the Vietnamese stock market. The weight of each stock is determined by its market capitalization.
   • NIKKEI 225 (Japan): A stock index in Japan, consisting of 225 stocks from major companies in the Japanese economy.

Understanding these classifications provides valuable insights for investors, helping them make informed decisions and assess the stock market’s situation from various perspectives.

3. Types of Vietnam’s stock market index

In Vietnam’s stock market, indices are categorized based on various criteria. Here are some 10 common stock market index in Vietnam:

1. 1. VN index (Viet Nam Index):

1. • • Scope: The main Vietnam index, lists the top stocks on the Ho Chi Minh Stock Exchange (HOSE).
     • Purpose: The main index reflects, measures, and tracks the price movements of listed companies on HOSE.

2. 2. HNX-Index (HNX Index):

   • • Scope: Stocks listed and traded on the Hanoi Stock Exchange (HNX).
     • Purpose: Measures and monitors the stock prices of listed companies on HNX.

3. 3. HNX30-Index (HNX30 Index):

   • Scope: Focuses on the top 30 companies with good capitalization on the Hanoi Stock Exchange (HNX).
   • Purpose: Tracks the price fluctuations of this group of companies, providing detailed information on market performance.

4. 4. UPCOM-Index (UPCOM Index):

   • Scope: Stocks of medium and small-sized companies not yet qualified for listing on the Stock Exchange.
   • Purpose: Evaluate the performance of companies not yet listed or registered on the main exchange.

5. 5. VN30-Index (VN30 Index):

   • Scope: Includes the 30 most influential stocks in the Vietnam stock market.
   • Purpose: Provides a detailed view of the performance of companies with significant liquidity and importance in the stock market.

6. 6. VNDiamond Index (VNDiamond Index):

   • Scope: Focuses on leading stocks, considered the “Diamonds” of the market in sectors like banking, retail technology, real estate, etc., in Vietnam.
   • Purpose: Select a group of potential growth stocks, reflecting foreign investors’ interest in the Vietnamese market.

7. 7. VN100-Index (VN100 Index):

   • Scope: Nearly 100 stocks with the largest market capitalization in the Vietnamese stock market.
   • Purpose: Measures performance and monitors fluctuations, focusing on large-scale companies and their impact on the market.

8. 8. VNMidcap-Index (VNMidcap Index):

   • Scope: Measures the volatility of stocks in the mid-cap segment.
   • Purpose: Measures and monitors the performance of medium and small-sized companies in the Vietnam stock market.

9. 9. VNFin Select Index (Vietnam Select Sector Index):

   • Scope: A portfolio of 10 stocks focused on the financial sector representing securities, banking, and insurance, selected from the VNAllshare Financials index.
   • Purpose: Tracks the value fluctuations of the VNFin Select portfolio, providing crucial information about Vietnam’s financial sector.

10. 10. Vietnam Leading Financial Index (VNFin Lead Index):

    • Scope: Measures the movement of stocks in the financial sector in the Vietnam stock market.
    • Purpose: Monitors and evaluates the performance of stocks in the financial sector with significant market capitalization and liquidity.

These indices offer useful information for investors to monitor and assess the Vietnamese stock market from various perspectives.

3. Understanding Index Funds? Why Invest in ETF Index?

1. What is Index Fund?

Index Funds are investment tools designed to replicate specific stock market indices, such as VN30 or S&P 500. These index funds empower investors to help you understand the market by mimicking the ups and downs of these important indices.

>>> Learn more about Index Funds

In the Vietnamese financial landscape, eminent indices like VN30-Index, VN100-Index, VNMidmap-Index, etc play a pivotal role in sculpting investment products, particularly Exchange-Traded Funds (ETFs). For new investors, ETFs make it an easy way to get a mix of stocks from top and medium-sized companies within the index. It’s like getting a taste of the entire stock market with just one investment!

2. Why Invest in ETF Index?

Investing in ETFs that stimulate stock market indices offers numerous advantages:

• Diversification: ETFs allow holding multiple stocks from different companies, reducing risk compared to investing in individual stocks.
• Convenience: Managing and monitoring an ETF is more straightforward than keeping track of various individual stocks in a portfolio..
• Low Costs and Save money: The management fees of ETFs are lower than buying each stock in the index one by one.