The Small Ordinaries Index (SOX) is a stock market index that measures the performance of the 50 smallest companies listed on the Australian Securities Exchange (ASX). It is a market-capitalization weighted index, meaning that the companies with the largest market capitalizations have the greatest influence on the index’s performance. The SOX is a popular benchmark for investors who want to track the performance of small-cap stocks in Australia.
The SOX was launched in 1990 and has since become one of the most widely followed small-cap indices in Australia. It is used by investors to track the performance of small-cap stocks, as well as to make investment decisions. The SOX is also used by fund managers to create investment products that track the performance of the small-cap market.
There are a number of benefits to investing in small-cap stocks. Small-cap stocks tend to be more volatile than large-cap stocks, but they also have the potential to generate higher returns. This is because small-cap companies are often more nimble and innovative than large-cap companies, and they are therefore able to grow more quickly.
Page Contents
What is the Small Ordinaries Index?
The Small Ordinaries Index (SOX) is a stock market index that measures the performance of the 50 smallest companies listed on the Australian Securities Exchange (ASX). It is a market-capitalization weighted index, meaning that the companies with the largest market capitalizations have the greatest influence on the index’s performance. The SOX is a popular benchmark for investors who want to track the performance of small-cap stocks in Australia.
- Market-capitalization weighted: The SOX is a market-capitalization weighted index, meaning that the companies with the largest market capitalizations have the greatest influence on the index’s performance.
- Small-cap stocks: The SOX measures the performance of the 50 smallest companies listed on the ASX.
- Benchmark for investors: The SOX is a popular benchmark for investors who want to track the performance of small-cap stocks in Australia.
- Performance: The SOX has outperformed the broader market over the long term.
- Volatility: Small-cap stocks are more volatile than large-cap stocks, but they also have the potential to generate higher returns.
- Growth potential: Small-cap companies are often more nimble and innovative than large-cap companies, and they are therefore able to grow more quickly.
- Diversification: Small-cap stocks can help to diversify an investment portfolio.
- Risk: Investing in small-cap stocks is riskier than investing in large-cap stocks.
The SOX is an important index for investors who are interested in tracking the performance of small-cap stocks in Australia. It is a well-diversified index that provides investors with exposure to a range of different industries and sectors. The SOX has outperformed the broader market over the long term, and it is a good option for investors who are looking for growth potential.
Market-capitalization weighted
The Small Ordinaries Index (SOX) is a market-capitalization weighted index, meaning that the companies with the largest market capitalizations have the greatest influence on the index’s performance. This is in contrast to an equal-weighted index, in which all companies have the same weight in the index regardless of their size. Market-capitalization weighting ensures that the SOX is more representative of the overall small-cap market in Australia.
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Facet 1: Components of market-capitalization weighting
The market capitalization of a company is calculated by multiplying its share price by the number of shares outstanding. The companies with the largest market capitalizations are those with the highest share prices and/or the largest number of shares outstanding. In the case of the SOX, the top 10 companies by market capitalization account for over 50% of the index’s weight.
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Facet 2: Examples of market-capitalization weighting
Some examples of companies with large market capitalizations that are included in the SOX include:
- BHP Group
- Rio Tinto
- Fortescue Metals Group
- Wesfarmers
- Woolworths Group
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Facet 3: Implications of market-capitalization weighting
The market-capitalization weighting of the SOX has a number of implications for investors. First, it means that the index is more heavily influenced by the performance of large-cap companies. This can be a disadvantage for investors who are looking to invest in small-cap companies, as their returns may be more muted than the returns of large-cap companies. Second, the market-capitalization weighting of the SOX can lead to the index becoming top-heavy, meaning that a few large companies have a disproportionate influence on the index’s performance. This can make the index more volatile and less representative of the overall small-cap market.
Overall, the market-capitalization weighting of the SOX is an important factor to consider for investors who are looking to track the performance of small-cap stocks in Australia. It is important to understand how market-capitalization weighting works and its implications for the index’s performance before investing.
Small-cap stocks
The Small Ordinaries Index (SOX) is a stock market index that measures the performance of the 50 smallest companies listed on the Australian Securities Exchange (ASX). Small-cap stocks are companies with a market capitalization of less than $2 billion. They are typically younger and more volatile than large-cap stocks, but they also have the potential to generate higher returns.
The SOX is an important index for investors who are interested in tracking the performance of small-cap stocks in Australia. It is a well-diversified index that provides investors with exposure to a range of different industries and sectors. The SOX has outperformed the broader market over the long term, and it is a good option for investors who are looking for growth potential.
Small-cap stocks can be a good investment for several reasons. First, they are more likely to grow quickly than large-cap stocks. This is because small-cap companies are often more nimble and innovative than large-cap companies. They are also less likely to be affected by economic downturns. Second, small-cap stocks are less correlated to the broader market. This means that they can provide diversification to an investment portfolio.
However, it is important to remember that small-cap stocks are also more volatile than large-cap stocks. This means that they can be more risky to invest in. Investors should only invest in small-cap stocks if they are comfortable with the risks involved.
Benchmark for investors
The Small Ordinaries Index (SOX) is a stock market index that measures the performance of the 50 smallest companies listed on the Australian Securities Exchange (ASX). It is a popular benchmark for investors who want to track the performance of small-cap stocks in Australia.
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Facet 1: Role of the SOX as a benchmark
The SOX is a valuable tool for investors who want to track the performance of small-cap stocks in Australia. It provides a single, comprehensive measure of the performance of this segment of the market. Investors can use the SOX to compare the performance of their own small-cap investments to the overall market, and to identify investment opportunities.
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Facet 2: Examples of investors using the SOX
The SOX is used by a wide range of investors, including individual investors, fund managers, and financial advisors. Individual investors can use the SOX to track the performance of their own small-cap investments. Fund managers can use the SOX to create investment products that track the performance of the small-cap market. Financial advisors can use the SOX to provide advice to their clients on investing in small-cap stocks.
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Facet 3: Implications of the SOX’s popularity
The popularity of the SOX has a number of implications. First, it means that the SOX is a well-followed index. This means that there is a lot of information available about the index and its components. Second, the popularity of the SOX means that it is a liquid index. This means that investors can easily buy and sell stocks that are included in the index.
Overall, the SOX is a valuable tool for investors who want to track the performance of small-cap stocks in Australia. It is a popular benchmark that is used by a wide range of investors. The popularity of the SOX means that there is a lot of information available about the index and its components, and that it is a liquid index.
Performance
The Small Ordinaries Index (SOX) is a stock market index that measures the performance of the 50 smallest companies listed on the Australian Securities Exchange (ASX). It is a popular benchmark for investors who want to track the performance of small-cap stocks in Australia. The SOX has outperformed the broader market over the long term, making it an attractive investment option for investors who are looking for growth potential.
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Facet 1: Components of the SOX’s outperformance
There are a number of factors that have contributed to the SOX’s outperformance of the broader market over the long term. First, small-cap stocks are more likely to grow quickly than large-cap stocks. This is because small-cap companies are often more nimble and innovative than large-cap companies. They are also less likely to be affected by economic downturns.
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Facet 2: Examples of the SOX’s outperformance
There are a number of examples of small-cap stocks that have outperformed the broader market over the long term. For example, the SOX has returned an average of 10% per year over the past 10 years, compared to 7% per year for the broader market. This means that an investor who invested $10,000 in the SOX 10 years ago would have made $46,133, while an investor who invested $10,000 in the broader market would have made $25,840.
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Facet 3: Implications of the SOX’s outperformance
The SOX’s outperformance of the broader market has a number of implications for investors. First, it shows that small-cap stocks can be a good investment for investors who are looking for growth potential. Second, it shows that the SOX is a good benchmark for investors who want to track the performance of small-cap stocks in Australia.
Overall, the SOX’s outperformance of the broader market is a testament to the growth potential of small-cap stocks. Investors who are looking for growth potential should consider investing in the SOX or in individual small-cap stocks.
Volatility
The Small Ordinaries Index (SOX) is a stock market index that measures the performance of the 50 smallest companies listed on the Australian Securities Exchange (ASX). Small-cap stocks are typically more volatile than large-cap stocks, but they also have the potential to generate higher returns. This is because small-cap companies are often more nimble and innovative than large-cap companies, and they are also less likely to be affected by economic downturns.
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Facet 1: Components of volatility in small-cap stocks
The volatility of small-cap stocks is due to a number of factors, including their size, liquidity, and exposure to risk. Small-cap companies are typically smaller and less well-known than large-cap companies, which means that they are more likely to be affected by changes in market sentiment. They are also less liquid than large-cap companies, which means that it can be more difficult to buy and sell their shares. Finally, small-cap companies are often more exposed to risk than large-cap companies, which means that they are more likely to be affected by economic downturns.
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Facet 2: Examples of volatility in small-cap stocks
There are a number of examples of small-cap stocks that have experienced high levels of volatility. For example, the share price of the small-cap mining company Sundance Resources has fluctuated wildly in recent years. In 2011, the company’s share price reached a high of $1.40. However, by 2015, the share price had fallen to just $0.05. This volatility is due to a number of factors, including the company’s exposure to the global mining industry and its reliance on a single project.
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Facet 3: Implications of volatility for the Small Ordinaries Index
The volatility of small-cap stocks has a number of implications for the Small Ordinaries Index. First, it means that the SOX is more volatile than the broader market. This is because the SOX is heavily weighted towards small-cap stocks. Second, the volatility of small-cap stocks means that the SOX is more likely to experience large swings in value. This can make it difficult for investors to track the performance of the SOX and to make investment decisions.
Overall, the volatility of small-cap stocks is an important factor to consider for investors who are considering investing in the Small Ordinaries Index. Investors should be aware of the risks associated with investing in small-cap stocks and should only invest in the SOX if they are comfortable with the risks involved.
Growth potential
The Small Ordinaries Index (SOX) is a stock market index that measures the performance of the 50 smallest companies listed on the Australian Securities Exchange (ASX). Small-cap companies are typically more nimble and innovative than large-cap companies, and they are therefore able to grow more quickly. This growth potential is one of the key reasons why investors are attracted to the SOX.
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Facet 1: Components of growth potential
There are a number of factors that contribute to the growth potential of small-cap companies. First, small-cap companies are typically more focused on a single product or service, which allows them to develop a deep understanding of their market and to innovate quickly. Second, small-cap companies are often more willing to take risks than large-cap companies, which gives them the potential to grow rapidly in new markets. Finally, small-cap companies are often more flexible than large-cap companies, which allows them to adapt quickly to changing market conditions.
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Facet 2: Examples of growth potential
There are a number of examples of small-cap companies that have experienced high levels of growth. For example, the company CSL Limited has grown from a small biotechnology company to one of the largest healthcare companies in the world. Another example is the company Afterpay Touch Group, which has grown from a small start-up to one of the largest fintech companies in Australia.
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Facet 3: Implications of growth potential
The growth potential of small-cap companies has a number of implications for investors. First, it means that the SOX is a good investment for investors who are looking for growth potential. Second, it means that investors should not be afraid to invest in small-cap companies, even if they are not well-known. Finally, it means that investors should be aware of the risks associated with investing in small-cap companies, as they can be more volatile than large-cap companies.
Overall, the growth potential of small-cap companies is a key factor to consider when investing in the Small Ordinaries Index. Investors who are looking for growth potential should consider investing in the SOX or in individual small-cap stocks.
Diversification
Diversification is an important investment strategy that can help to reduce risk. It involves investing in a variety of different assets, such as stocks, bonds, and real estate. This helps to ensure that your portfolio is not too heavily invested in any one asset class, and that you are less likely to lose money if one asset class performs poorly.
Small-cap stocks can be a good addition to a diversified investment portfolio. This is because they tend to be less correlated to the broader market than large-cap stocks. This means that they can help to reduce the overall volatility of your portfolio.
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Components of diversification
Diversification involves investing in a variety of different assets, such as stocks, bonds, and real estate. It also involves investing in different sectors of the economy and in companies of different sizes.
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Examples of diversification
An example of diversification would be to invest in a mix of large-cap stocks, small-cap stocks, bonds, and real estate. Another example would be to invest in a mix of companies in different sectors of the economy, such as technology, healthcare, and financials.
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Implications of diversification in the context of “what is the small ordinaries index?”
The Small Ordinaries Index is a stock market index that measures the performance of the 50 smallest companies listed on the Australian Securities Exchange (ASX). Investing in the SOX can be a good way to diversify an investment portfolio, as it provides exposure to a range of small-cap stocks.
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Conclusion
Diversification is an important investment strategy that can help to reduce risk. Small-cap stocks can be a good addition to a diversified investment portfolio, as they tend to be less correlated to the broader market than large-cap stocks. The Small Ordinaries Index is a stock market index that provides exposure to a range of small-cap stocks, and can be a good way to diversify an investment portfolio.
Risk
The Small Ordinaries Index (SOX) is a stock market index that measures the performance of the 50 smallest companies listed on the Australian Securities Exchange (ASX). Small-cap stocks are typically more volatile than large-cap stocks, and they are therefore riskier to invest in. This is because small-cap companies are typically less well-established than large-cap companies, and they are more likely to be affected by changes in the economy or in their industry.
There are a number of factors that contribute to the higher risk of investing in small-cap stocks. First, small-cap companies are typically less diversified than large-cap companies. This means that they are more exposed to the risks associated with their particular industry or sector. Second, small-cap companies are often more reliant on debt financing than large-cap companies. This means that they are more vulnerable to changes in interest rates and to economic downturns. Finally, small-cap companies are often less well-known than large-cap companies, which makes them more difficult to research and to value.
The higher risk of investing in small-cap stocks is reflected in the fact that they typically have higher expected returns than large-cap stocks. This is because investors demand a higher return for taking on more risk. However, it is important to remember that small-cap stocks can also experience large losses, and investors should only invest in them if they are comfortable with the risks involved.
The SOX can be a good investment for investors who are looking for growth potential and who are comfortable with the risks involved. However, it is important to remember that small-cap stocks are more volatile than large-cap stocks, and that they can experience large losses. Investors should only invest in the SOX if they are comfortable with the risks involved.
FAQs about the Small Ordinaries Index
The Small Ordinaries Index (SOX) is a stock market index that measures the performance of the 50 smallest companies listed on the Australian Securities Exchange (ASX). It is a popular benchmark for investors who want to track the performance of small-cap stocks in Australia.
Question 1: What is the difference between the SOX and other stock market indices?
Answer: The SOX is unique in that it measures the performance of the 50 smallest companies listed on the ASX. This makes it a good benchmark for investors who want to track the performance of small-cap stocks in Australia.
Question 2: How is the SOX calculated?
Answer: The SOX is a market-capitalization weighted index, meaning that the companies with the largest market capitalizations have the greatest influence on the index’s performance.
Question 3: What are the benefits of investing in the SOX?
Answer: The SOX can provide investors with exposure to a range of small-cap stocks, which can help to diversify an investment portfolio. Small-cap stocks also have the potential to generate higher returns than large-cap stocks, although they are also more volatile.
Question 4: What are the risks of investing in the SOX?
Answer: Small-cap stocks are more volatile than large-cap stocks, and they are therefore riskier to invest in. This is because small-cap companies are typically less well-established than large-cap companies, and they are more likely to be affected by changes in the economy or in their industry.
Question 5: Is the SOX a good investment?
Answer: The SOX can be a good investment for investors who are looking for growth potential and who are comfortable with the risks involved. However, it is important to remember that small-cap stocks can experience large losses, and investors should only invest in the SOX if they are comfortable with the risks involved.
Question 6: How can I invest in the SOX?
Answer: Investors can invest in the SOX through a variety of investment products, such as exchange-traded funds (ETFs) and managed funds. ETFs are a popular way to invest in the SOX, as they provide investors with a diversified exposure to small-cap stocks at a low cost.
Summary: The SOX is a stock market index that measures the performance of the 50 smallest companies listed on the ASX. It is a popular benchmark for investors who want to track the performance of small-cap stocks in Australia. The SOX can be a good investment for investors who are looking for growth potential and who are comfortable with the risks involved.
Transition to the next article section: For more information on the Small Ordinaries Index, please visit the ASX website.
Tips for Investing in the Small Ordinaries Index
The Small Ordinaries Index (SOX) is a stock market index that measures the performance of the 50 smallest companies listed on the Australian Securities Exchange (ASX). It is a popular benchmark for investors who want to track the performance of small-cap stocks in Australia.
Here are a few tips for investing in the SOX:
Tip 1: Consider your investment goals and risk tolerance. Before investing in the SOX, it is important to consider your investment goals and risk tolerance. Small-cap stocks are typically more volatile than large-cap stocks, so it is important to make sure that you are comfortable with the risks involved before investing.
Tip 2: Diversify your portfolio. Investing in a single stock or sector can be risky, so it is important to diversify your portfolio by investing in a variety of different assets. The SOX can be a good addition to a diversified portfolio, as it provides exposure to a range of small-cap stocks.
Tip 3: Do your research. Before investing in any stock, it is important to do your research and understand the company’s business model, financials, and competitive landscape. This will help you to make informed investment decisions.
Tip 4: Consider investing through an ETF or managed fund. ETFs and managed funds are a convenient way to invest in the SOX. ETFs are a type of investment fund that tracks the performance of a particular index, such as the SOX. Managed funds are actively managed by a fund manager who makes investment decisions on behalf of investors.
Tip 5: Rebalance your portfolio regularly. Over time, the composition of your portfolio will change as some investments perform better than others. It is important to rebalance your portfolio regularly to ensure that it still meets your investment goals and risk tolerance.
Summary: The SOX can be a good investment for investors who are looking for growth potential and who are comfortable with the risks involved. By following these tips, you can increase your chances of success when investing in the SOX.
Transition to the article’s conclusion: For more information on the Small Ordinaries Index, please visit the ASX website.
Conclusion
The Small Ordinaries Index (SOX) is a stock market index that measures the performance of the 50 smallest companies listed on the Australian Securities Exchange (ASX). It is a popular benchmark for investors who want to track the performance of small-cap stocks in Australia. The SOX has outperformed the broader market over the long term, and it is a good option for investors who are looking for growth potential.
However, it is important to remember that small-cap stocks are more volatile than large-cap stocks, and they are therefore riskier to invest in. Investors should only invest in the SOX if they are comfortable with the risks involved.
