• Morgan Stanley EAFE. This index is often labeled the MSCI EAFE index, which is short for Morgan Stanley Capital International Europe, Australasia, Far East index. In other words, it covers the developed foreign markets (as opposed to those considered to still be "emerging"). As a broad foreign index, it does a good job, although some investors would say it masks the fact that various international markets act very differently at times; i.e. stocks may be booming in Europe and tanking in Japan, or vice versa.
Value/Growth Indexes
In recent years, variations on many of the above indexes have been created that split a particular index into value and growth components. This is usually done by applying one or more valuation measures to all of the stocks in that index, with all those meeting certain criteria placed in a value index and the rest placed in a growth index.
What to Do With This Information
Many different mutual funds are based on the indexes we've just covered. If you participate in a company retirement plan at work, you may have one or more of them available to you. You can determine which index is being targeted by looking in the summary information typically provided for each fund, or if necessary, by looking in the fund's prospectus. Once you've identified the index being targeted by a particular fund, you can tell by the descriptions in this article which segment of the market that fund focuses on. Constructing an index fund portfolio of your own is within reach at that point. Simply follow our Just-the-Basics formula by dividing the stock portion of your portfolio among the index funds available to you as follows: 20% international, 40% large-company focused, and 40% small-company focused.
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