ASX 200 Index: What it is, Components, How to Invest

The ASX 200 is the reference index for the Australian financial market, and groups together 200 stocks related to the listed companies with the largest market capitalization. Let’s see in detail what it is, its quotation, how to invest and forecasts for the future.

What is the ASX 200 Index

Launched in March 2000, the ASX 200 is the true economic engine of Australian finance. Managed by one of the world’s leading and most famous rating agencies, Standard & Poor’s, it is considered the benchmark for equity performance across the entire country. Its portfolio is based on the 200 largest ASX-listed stocks, which together represent around 80% of the total capitalization of the Australian stock market. 

The ASX index was created with the aim of being able to offer a usable and tradable index as a basis for trading, thanks above all to its high liquidity and low turnover. This made it possible to establish the ASX 200 on the market as a benchmark not only for investment returns but also for the determination of a number of closely related indices (S&P ASX 200, ASX/SPI 200 VIX, etc.).

Composition: Which companies are included

As mentioned, the ASX 200 is based on the 200 largest Australian listed stocks, and is “capitalization weighted”, meaning that the direct contribution of a company is relative to its actual total market value, i.e. the share price multiplied by the number of marketable securities. The requirements to be part of the ASX 200, essentially fall into three types:

  • Market capitalization
  • Liquidity
  • Listing

Therefore, only certain stocks that are part of and listed on the Australian Stock Exchange can be considered for inclusion in any of the S&P/ASX indices.

Among its prominent companies, today we find important names of the Australian panorama, such as some banking institutions (Bank of Queensland, Commonwealth Bank), Heltcare (CSL, Fisher & Paykel), financial groups (Westpac, Afterpay), communications companies (Telstra, REA Group), industry (Auckland Airport, Transurban), and many others.

Price and Historical Trend 

Looking at the performance of the ASX 200 index, we can immediately define some fundamental points. Through the evaluation and interpretation of the graph, with a reference period of the last 10 years (2010 – 2020), what immediately jumps to the eye is the impressive positive trend constantly outlined, with an increase in value of about 65%.

And even if we decide to dwell on a more “short” period, taking into consideration the last calendar year (Jan. 2021 – Jan. 2022), we will see that the index has undergone a positive variation of almost 10%, going from 6,800 points to 7,580 approximately.

Having the possibility of interacting with an efficient and detailed tool such as a graph, offers the investor a 360 degree map of what is the trend, the oscillations and the fluctuations of the chosen reference market, therefore it is fundamental to have an analytical approach, in the “graphic” evaluation of the financial elements.

How to Buy ASX 200 Shares 

The reference currency of the ASX 200 is the Australian dollar, and there are various solutions available to decide to buy its value; through securities brokerage firms (SIM), through banking institutions, or by opting for a financial broker.

In the first case, turning to SIMs, the service that will be offered will mainly concern securities brokerage operations, since unlike banks they only offer some particular types of investment services.

Deciding then to opt for a bank, it will be necessary to open a current account specifically dedicated to buying and selling transactions on financial markets, sometimes accruing commissions and management costs applied, higher than the various players in the market.

On the other hand, all those online platforms that use the internet to interact, assist and interpret the market, in order to accompany and support the user in the process of buying and selling shares, are defined as financial brokers. The effectiveness of the technology available, some tools designed ad hoc and a thorough knowledge of the financial dynamics, make them much more efficient than the previous ones, ensuring the investor, tools and guidelines constantly updated and valid.

Speaking of platforms available on the market today, we can say that eToro covers without a shadow of a doubt one of the key roles in online investing. Initially created with the aim of becoming an interesting social trading project, over time it has become one of the largest brokers in the world, boasting one of the most important and operational communities in the industry, as well as a growing number of users who daily make, through the platform, buying and selling transactions.

There are several reasons to choose eToro, and among its main advantages we can highlight: the zero commission fees, the absence of any cost of commission or ticket, the possibility of using a free demo account. The latter is a “test” platform, identical to the original, where you can start investing through the use of virtual money, having the opportunity to practice before investing real capital.

Future Forecast 

The ASX 200 has, arguably, one of the strongest assets in the global market, having decided to focus its entire value on domestic territory. In addition, the Standard & Poor’s guarantee of management, undoubtedly increases the capacity and strength of the index, fully demonstrated by its numbers and trends in continuous growth.

It is more than ever necessary to underline that in no operation will it ever be possible to certify and guarantee a 100% secure gain, since the fluctuations and the general dynamics of the market undergo continuous fluctuations based on a large number of factors, which very often are also of an extra-financial nature.

Having said that, we can say that the ASX 200 is once again one of the most capitalized and positive indices of the global financial market.

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