Imagine an Easter basket: a bunch of candies and colored eggs all collected and lumped together. It doesn’t have all the candy or all the eggs...but an extensive enough sample to give you a stomachache (just as any good Easter or Halloween should end).
A market basket works in a similar way. It presents a selected group of securities meant to stand in for a particular part of the market. If you want to see how the pharmaceutical sector is doing, you don't need to look at how shares of every drug maker are performing. You can pick a few bigwigs and important players.
This process underlies the idea behind market indexes. You don't need to look at every stock trading on Wall Street. Instead, look at how the S&P 500 is doing, a basket of the 500 most important publicly-traded firms.
The idea of a market basket comes up in economics as well. For instance, inflation measures, like the consumer price index (CPI), don't track the prices of every item anyone has ever bought. Instead, the government picks a representative sample...a basket of items chosen to provide a close approximation of the general inflation situation.
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Finance: What is a Country Basket (Index...30 Views
Finance, a la shmoop. What is a country basket index fund?
All right we're picking daisies, marigolds, lilies so uh how do we [Pictures of flowers]
rephrase in Italian? Like, we want to fill a portfolio basket with just stocks [Pouring a glass of red wine]
representing the overall financial health of Italy. Is Italy healthy? While
they smoke a lot they drink a lot of wine they eat a bunch of pasta but there
always seems to be a woman from some small village who's celebrating her [Old woman at a birthday party]
117th birthday over there. Well a country basket is just an index fund of
stocks representing a country. Like we're doing Korea... South we're gonna have
in that basket dunno some Samsung, a load of Daewoo, a hunk of Hyundai and some [Company stocks being added to the basket]
nice barbecue on the side. That'd be our Korean country basket and it's a good
basket to fill if you're just bullish on a country but not really sure which
flower on which to place your bets. It's like instead of trying to decide between [The stocks in the basket turn into flowers]
roulette or poker or slots... Well you just buy stock in Las Vegas
Sands you know you bet on the entire casino, and bueno Fortuna you know good [Someone checking their cards in a casino]
luck there pal, doesn't the house always win? Yeah so why do people keep going there?...
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