1) Basic

What is a Stock Index (IDX, Nasdaq, Nikkei)

Every evening you see the news: 'IHSG closed down 1.2%.' You think: 'What even is IHSG? Does it matter to me?' The answer: it matters a lot. IHSG is like the 'thermometer' measuring the health of Indonesia's stock market.

Definition

IHSG (Indeks Harga Saham Gabungan) or Jakarta Composite Index (JCI) is a number representing the average price movement of all stocks listed on the Indonesia Stock Exchange. If IHSG rises, stock prices on IDX are going up on average. If it falls, they're generally declining.

Simple Explanation (Analogy)

IHSG is like a class's average grade. If the class average goes up, not every student scored higher -- some went up, some went down, but the overall trend is upward. Same with IHSG: even if IHSG rises 2%, your specific stock might drop. IHSG is just a general picture of 'market mood.'

Indonesian Stock Example

IHSG traded around 7,000-7,800 in 2024. Stocks with large weightings in IHSG like Cari Saham, and ASII heavily influence its movement. If BBCA rises significantly, IHSG can get pulled up even if many small stocks decline. That's why IHSG can sometimes be 'deceptive' -- it looks green, but your portfolio is red.

How to Use

Use IHSG as a gauge for general market conditions, not as a signal to buy/sell individual stocks. IHSG dropping doesn't mean you should sell everything.
Watch IHSG's long-term trend. Historically, IHSG tends to rise over the long term. So corrections (temporary dips) can be buying opportunities for long-term investors.
Compare your portfolio performance with IHSG. If IHSG gained 10% for the year but your portfolio only gained 3%, your stock-picking strategy might need evaluation.

Common Mistakes

Panicking when IHSG drops 2-3% in a day. Historically, IHSG has always recovered from major drops -- even after the 2008 crisis and COVID-19. Corrections are normal.
Assuming IHSG rising means all stocks are rising. IHSG is heavily influenced by large-cap stocks. The majority of stocks could be falling while IHSG stays green.
Completely ignoring IHSG. While it's not the only reference, IHSG provides important context about market sentiment and foreign capital flows.

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FAQ

What's a 'normal' IHSG number?

There's no fixed 'normal' number. IHSG constantly evolves over time. What matters isn't the number but the trend. IHSG at 7,000 in 2024 isn't inherently better or worse than 6,000 in 2019 -- the context is different.

Can I invest directly in IHSG?

You can't buy IHSG directly, but you can buy ETFs (Exchange Traded Funds) that track IHSG's movement, like R-LQ45X or XIIT. By buying these ETFs, you essentially 'buy the entire market' at once.