Question

Select a major national stock market index, explain the composition of the index, liquidity, volatility? How would you invest in your selected market?

Answer 1

ANSWER DOWN BELOW. FEEL FREE TO ASK ANY DOUBTS. THUMBS UP PLEASE.

The major national stock market index I am taking is Sensex.

Sensex is a major national stock market index of the Indian stock market.

Sensex is composed of top 30 companies of India by market capitalisation.

It contains big names such as: Reliance industries limited, Tata Motors, Tata consultancy services, HDFC bank etc.

the constituents of the index are highly liquid. You can easily buy and sell it during market hours.

The volatility of index changes from time to time. At present, it's highly volatile.

In general, emerging stock markets like India are considered volatile.

The Sensex Index Fund has an average return of more than 18% p.a in 40 years (considering dividend).  

It has gone from ₹100 to ₹40,500.
Taking factors like foreign exchange into consideration it will still be more than 12% in local currency like the USA. It shows the amazing growth potential and performance of the Indian stock market index.

You can invest in the Indian stock market (selected market in this case) by:

a. Primary markets:

This the place where companies list their shares on the exchange through a process called an initial public offering.
IPO happens in the primary market with the help of investment banks.  

Through an initial public offering, the Company directly deals with the public or the investors.

b. Secondary markets:

Exchange are secondary markets where an investor deals with another investor.

Securities exchanges, or exchanges, are where traders can meet to arrange their trades. Like New York stock exchange.

They are generally order-driven.

Order-driven markets arrange trades by matching buy orders with sell orders.  

The buyer offers a bid price and the seller quotes an Ask price. With the demand & supply forces into play the matching happens.

The trades successful happens with the help of brokers who match the order with the help of order matching system. The investor can Access the stock market through his brokerage account.