The U.S. equity market represents less than one-half of the world equity market, thus the remaining international markets represents an important piece of the world financial picture. International equity investors are exposed to several additional types of risks, which include currency risk, exchange rate risk, political risk, liquidity, and settlement risk. While international investing entails a great deal of risk by itself, when combined with other asset classes such as U.S. stocks and bonds, overall portfolio volatility can be reduced and return potential can be enhanced. This phenomenon exists because U.S. and international markets are not perfectly correlated. In other words, an event that impacts U.S. stocks may not be important to the market in India, thus their market would not move in tandem with the U.S. market in most instances.
Indexation is a form of passive management.
Here, the belief is that markets are efficient - that the best estimate of a security's value is its current price. The DJIA is a measure of the relative price of 30 widely held stocks traded on the New York Stock Exchange. The value of the DJIA is determined by dividing the sum of the per share prices of the 30 stocks in the index by an adjusted denominator that accommodates for splits and changes in stock composition. Therefore the index values represent equal weighted calculations. The NYSE is a market value weighted index of all domestic stocks listed on the New York Stock Exchange.