Indices and Platforms: The Big 4 at the top

Etf: Exchange traded Funds:
The long history of the stock market has been changed most notably by 5 men and a tree: Henry Varnum Poor (Standard and Poor's: 1868 with his books on railroad company statistics), Charles Dow, Edward Jones, and Charles Bergstresser (DJIA: 1882, charting 9 railroads, a steamship company, and a communications company), and Bernard Madoff (the most notable forefather of the NASDAQ). The Buttonwood Tree on Wall Street in the 1700s noted the beginning of the NYSE. While you could delve into the colorful history, here are some differences of the power indices and platforms, e.g. stocks included, gain/loss calculations, and what my instincts tell me:

Standard and Poor's: "Standard Services Remove the Doubt"

• Comprised of 500 large stocks in most industries. The S&P weights based on both capitalization and also has an equal weight index. The S&P also factors in how the respective industry is performing.
• Has several prerequisites:
• Market Cap over $5 Billion
• 4 consecutive qtrs profit where: income - discontinued Ops > 0
• Dollar Trades at least 30% of the Market Cap
• The publically available stocks (read: float) greater than 50%.
• Equal Weight Index is calculated: % increase of company (1/#stocks in index) = contribution
• Great exposure for small cap stocks and speculations
• Market Cap Weighted Index is calculated: % increase of company (MCap of company/MCap all companies) = daily contribution
• I believe this system of MCap weights is more telling of the actual performance of the index, especially since industry performance is factored.

DJIA:

• A PRICE-Weighted average of 30 stocks picked by the editors of The Wall Street Journal (owned by the DJIA). The companies are industry leaders (though transportation is not an included industry)
• Calculates $ value of the DJIA by the total $ value of stocks divided by a constantly modified number, which is modified (and ultimately diluted) by stock splits and many other fluctuations but in spite of weight of capitalization
• Calculates gains irrespective of the price point


• A stock gains $2 in one day, the DJIA gains 60 points total (for all 30 stocks). The gain is $2/0.14418073 (the divisor) = roughly 14 points. This is 14 points for the whole if the original price is $10 or $200

NYSE:

• Nearly 2,800 stocks (tracking stocks, ADR's and REIT's) traded in the composite at an $18 trillion market cap. $250K entry fee for a company to be traded on the floor, annual fee of $46,150. Auction type, only trade between 9:30am and 4pm EST. Under 1,200 seats open to stock brokers (auctioneers). Must issue over 1 million shares ($100 Million worth), with revenues over $10 Million in last 3 years
• Calculations use free-float capitalization and are weighted on both price and Return, and are updated in real time throughout the trading day with each trade of included stocks. The DJIA maintains calculations. However, the caps used only reflect the floated shares, rather than full caps.
• The final index value = adjusted market cap/next day's divisor. Where next day's divisor = Current day's divisor x (next day's adjusted market cap/current market cap)
• This exchange is clearly the biggest contributor to the productivity of the stock market and the American economy. Find more detail here: http://www.nyse.com/pdfs/methodology_nya.pdf

NASDAQ (National Association of Securites Dealers Automated Quote):

• The composite covers more than 5,000 companies. $125K entry fee for a company to be traded, yearly fee of $37,500. Dealer (aka market maker, Madoff's title) must be present in the transaction to facilitate trading. Companies must issue 1.25 Million shares ($70 Million worth), with revenues over $11 million in last 3 years.
• Calculated by aggregating the individual weights (constantly adjusted for each company) multiplied by the latest respective prices per share and dividing the aggregate by a divisor.
• Divisor = Divisor before adjustments x (Market value after adjustments/Market value before adjustments)
• Adjustments to decrease the divisor: Cash dividends, Other security dividend (i.e. not a stock dividend, but a security that changes the float), return of capital, repurchases, and spin-offs
• Adjustments to not affect the divisor: Stock dividends, splits, and reverse splits
• Adjustments to increase the divisor: Rights Offerings
• I think the NASDAQ holds the future of stocks, but that future may be decades if not centuries away. Better for mid-cap companies and penny stocks with mid-range upside. The exposure of this market is limited. 

Note that all of these are publicly traded companies since 2006. The DJIA typically outperforms the S&P by 1.3% annually. I believe the ETF for this index would be slightly misleading, but not to the point of affecting your bottom line. Occasionally a stock will move from another index into the DJIA (TSLA in 2013, for example), which tells me that the companies on the DJIA are the power houses in the market. I like the history of the NYSE and it is clearly more established (NASDAQ is only 40 years old compared to 220 years), with more rigid criteria and a more coveted model. 

Sector Groups

This list is as rudimentary as it gets, but as I learn more about the industries, I will add more and more until I surpass Jim Cramer.

Oil and Gas - products, equipment, and distribution thereof

• This industry has another 20-30 years in developed companies. Will always be utilized and 'refined'.

Basic Materials - Metals, Chemicals, Mining products

Industrials - Construction, aerospace/defense, railroad, commercial vehicles, electronics, Business supports

Conglomerates - Large parent corporations that manage subsidiaries. i.e. Siemens and General Electic

Consumer Services - Food/drug, apparel, and broadline retailers; Media/ent, Travel/leisure, gambling, restaurants, hotels

Health Care - Pharmaceuticals, equipment, biotechnology

• Huge potential and many start ups enter the market and cause too much supply for demand and only the fittest survive. Safe for long-term investing, and also for penny stocks.

Telecommunications (Phone technologies)

• Big business here; Cell phones are the future, unfortunately price points are daunting.

Utilities

Financials - Banks, insurance, financial services, real estate and REITs

• Insurance fuels the government and financial services fuel the economy, but scandals plague this industry so long term investing can be perilous. Great for the intermediate term (less than one year).

Technology - Computer, internet, hardware, semiconductors.

• An exciting field to invest in, but almost always speculative. Huge risks for moderate rewards

Also, derivatives and options is a field I am currently learning of. Call options are buys in the future that you may or may not exercise in exchange for a premium. You'll want to have a call option if you believe the security (i.e. stock) will be at a trough in the future (and then rise after the date of exercise). A put is a sale of a stock at a certain time (think shorting a security). Futures are obligations to buy or sell at a certain price.