Understanding the All Ordinaries index can give you a financial leg up
<p>You’ve probably seen the All Ordinaries Index quoted in a countless numbers of news reports over the years and never thought twice about it.</p>
<p>But even if you don’t have a Masters in Finance, understanding this index, and the information it is trying to convey to you can give you an investment edge.</p>
<p>But first, what is the All Ordinaries Index?</p>
<p>Well, to put it in basic terms, the All Ordinaries is a measurement of the movement of share values which have been traded on the Australian Stock Exchange (ASX).</p>
<p>So you can basically look at the All Ordinaries as a basic indicator of how the share market is performing and what the current trends are. The figure displayed by the All Ordinaries will reflect economic events and situations which the share market has reacted to, and in this sense it can be thought of as a reflection of the health of the economy.</p>
<p>So, how is the All Ordinaries calculated?</p>
<p>Well basically, without looking at the complicated mathematical formulas that go into the figure, the All Ordinaries is calculated by examining the market value of the 300 companies that are represented in the All Ordinaries Index portfolio.</p>
<p>The portfolio is updated monthly, and to be included a company must maintain an average turnover on the ASX of at least 0.5 per cent of its quotes shares per month and have a market value of at least 0.2 per cent of all domestic equities quoted on the ASX.</p>
<p>The All Ordinaries takes this data, interprets it through a formula and creates a figure that’s designed to represent the overall health of the market.</p>
<p>So how can this index help me?</p>
<p>Well, basically if you have a superannuation fund you’ve got some skin in the game, so to speak, and it’s useful to see how the stocks are performing.</p>
<p>Tat being said, Wealth For Life Financial Planning principal Rex Whitford told News.com.au your focus on an index depends on your investment earnings. “If you reinvest your earnings back into the market instead of spending them, then an accumulation index is a good guide. One example of this may be within your superannuation if you are still saving and not drawing a pension.”</p>
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