How does the ASX work?

Companies list on a stock exchange, such as the Australian Securities Exchange (ASX), to raise money by selling shares to investors who then have the chance to make a profit if the company performs well.

Stock exchanges provide a market for people to buy and sell shares in the companies listed on them. The ASX is open from 10am to 4pm, Monday to Friday.

There are over 2,000 companies listed on the ASX worth a combined $1.5trn, with more being added regularly. Smaller companies are generally considered to be riskier investments as they are more likely to go out of business than larger ones.

What does a share market index do?

The S&P/ASX 200 index tracks the largest 200 of those listed companies and is used as a reference point to measure the combined performance of their shares.

What does the S&P/ASX 200 show?

Each day the index will rise or fall as investors buy and sell shares in the component companies, which each have a weighting in the index based on their market capitalisation.

You can track the daily movements of each individual company by looking at its share price and by how many cents and what percentage it has moved. Any movements in the S&P/ASX 200 index itself are expressed in a percentage but also in points.

When the ASX 200 was created in 2000, it began with a value of 3,133.3 points, equal to the value of the broader All Ordinaries index at the time.

The All Ordinaries index tracks around 500 ASX-listed companies and was given a value of 500 points when it was established in 1980.

What shares can you buy and sell?

You can buy and sell shares in any of the individual companies listed on the ASX if you want to get exposure to all of the companies on an index like the S&P/ASX 200, then one way to do so through a single trade and for a relatively low cost is with an exchange traded fund (ETF).

It’s important to remember that the share market can fall as well as rise, which means you could lose money.