When you hear about ‘the share market’ on the news or when scrolling on your phone, it’s likely you will actually be hearing about the movements of the S&P/ASX 200 Index (ASX: XJO).

See, the share market is made up of over 2,000 different companies, all being bought and sold in one marketplace. As such, it’s very difficult to ascertain what the ‘entire market’ is doing by just looking at these thousands of different company names.

How the ASX 200 really works

That’s why the concept of an index is so useful. An index like the ASX 200 is really a collection of a select group of shares, usually those with the highest market capitalisation (or value).

The thinking goes that if we look at how the biggest companies are fairing, we’ll get a good idea of how the market is trading as a whole.

The ASX 200 index does just this by selecting the largest 200 public companies trading on the ASX.

But most indexes, including the ASX 200, don’t treat each company equally but rather adopt a system known as ‘weighting’. Weighting involves giving the larger companies a higher ‘weight’ or value within the index. By doing this, the movements of the largest shares are going to influence the overall index much more than the movements of the smaller companies.

So if we look at the index today, we can see how the largest companies come to dominate. Here’s a table of the top 10 shares within the ASX 200, and how much weight each share has.

All-stars of the ASX

ASX 200 share name	Index weighting (%)
CSL Limited (ASX: CSL)	8.12
Commonwealth Bank of Australia (ASX: CBA)	7.09
BHP Group Ltd (ASX: BHP)	6.57
Westpac Banking Corp (ASX: WBC)	3.72
National Australia Bank Ltd. (ASX: NAB)	3.60
Australia and New Zealand Banking Group Limited (ASX: ANZ)	3.29
Woolworths Group Ltd (ASX: WOW)	2.94
Wesfarmers Ltd (ASX: WES)	2.94
Telstra Corporation Ltd (ASX: TLS)	2.41
Transurban Group (ASX: TCL)	2.40

Table: Author’s own

As you can see, it’s really only the largest few ASX 200 companies that have significantly different weightings to the others in the top 10. As you move further and further down the table, each company’s individual ability to influence the overall index diminishes.

A massive 43% of the power to affect the overall movement of the ASX 200 index resides with these top 10 companies. Therefore, when you hear about the index rising or falling on any one day, it’s usually because a combination of the shares you see above are doing so.

So when you next hear about what the ASX 200 index or ‘ASX shares’ are doing, you’ll know that it’s the movements of the above companies that are really being discussed most of the time.

More reading

• Employees rewarded with $50 million in Woolworths shares and gifts
• ASX shares are in a bull market. What should investors do now?
• Telstra shares and 2 other ASX companies to buy in a low-interest rate world
• Top brokers just upgraded these 3 ASX 200 stocks to buy
• Is the Qantas share price a buy?

Sebastian Bowen owns shares of National Australia Bank Limited and Telstra Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of Transurban Group, Wesfarmers Limited, and Woolworths Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Woolworths Limited (ASX: WOW) will be rewarding its Australian and New Zealand staff with $50 million in shares and gift cards. Here’s why Woolworths is rewarding its workers and what it could do for the company’s share price.   

Why is Woolworths rewarding its staff?

Earlier this week Woolworths Group CEO, Brad Banducci released a statement announcing the company will reward its employees for their hard work during the bushfires and coronavirus pandemic. Banducci said the reward is in recognition of “extraordinary efforts and contributions during a year of unprecedented challenges.”

The supermarket giant will be rewarding more than 100,000 employees. As part of its rewards system, Woolworths will be giving full-time members up to $750 worth of shares in the company. Part-time members will be allocated shares on a pro-rata basis.  In addition, all Australian full and part-time workers will receive a $250 Woolworths gift card, with casuals to receive a $100 gift card.

Once completed, the share reward program will see Woolworths boast one of Australia’s biggest worker-dominated share registers.

How has Woolworths performed?

The coronavirus pandemic saw staff members inundated as panicked shoppers flocked to buy essential items. The unprecedented surge in demand was reflected in the company’s third-quarter sales results in late April. Woolworths reported its strongest quarterly sales growth through group sales surging more than 10% to $16.5 billion for the quarter.

Woolworths also received a $5 million boost from its stake in subscription-based meal kit provider Marley Spoon AG (ASX: MMM). In 2019, Woolworths invested $30 million in Marley Spoon through a debt and equity transaction. The Marley Spoon share price has since surged as the company enjoyed a boom in demand for at-home meal consumption.

Despite strong sales growth in its supermarket and liquor divisions, Woolworths has also incurred increased costs. According to the company’s management, increased costs for wages, security, supply chain and e-commerce will partially offset sales growth.

Should you buy Woolworths shares?

Many companies on the ASX say they put the well-being of their workers and customers first, however, few put their money where their mouth is. Although, Woolworths is far from perfect. The supermarket giant is in the midst of backpay claims after underpaying 5,700 workers $315 million over the past 10 years. However, despite these issues, I think the rewards program is a great initiative from Woolworths that should see the company win over new suitors.

More reading

• The 10 shares that significantly move the ASX 200 index
• Is the Qantas share price a buy?
• 3 large cap shares beating the ASX 200 this year
• Fund managers have been buying these ASX shares
• Why Coles and Woolworths shares were flat in May

Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Woolworths Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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ASX shares seem to be in a bull market. What should investors do? The S&P/ASX 200 Index (ASX: XJO) is up another 1% today, it’s back to 6,000 points.

The ASX 200 has risen 32% since 23 March 2020. An incredible run in such a short amount of time. If you’re just thinking ahead to 2030 and beyond then today is probably still a good time to buy shares because plenty of ASX shares are still not back to their February 2020 highs.

The coronavirus is still spreading around the world, particularly in the US and emerging markets like Brazil. ASX shares like BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG) are benefiting from the tough conditions mining environment in South America.

ASX bank shares like Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC) are flying higher. The buy now, pay later sector is going nuts – the share prices of Afterpay Ltd (ASX: APT), Zip Co Ltd (ASX: Z1P), Splitit Ltd (ASX: SPT) and Sezzle Inc (ASX: SZL) are soaring.

Australia certainly has done a better job at managing the spread of the infection as well as limiting the worst of the potential economic damage.

But should ASX share investors keep buying or remain patient?

Some investors may have a regular investment plan into an exchange-traded fund (ETF). If that’s the case, I wouldn’t worry too much about delaying your next ASX share investment.

But investors trying to pick the right shares should continue to be cautious and considered. The RBA has reduced the official interest rate to a very low level. But that doesn’t mean businesses are out of the woods yet. Some businesses may never be the same again. The unemployment rate is still much higher than before COVID-19.

I’ve always said that investors should just focus on whether the potential investment is good value (and ignore the rest of the noise). There aren’t many obvious bargains like there were before a couple of months ago.

Hoping that everything will turn out fine over the six months is not an investment strategy. ASX shares that generate most of their earnings in Australia and New Zealand seem to have an easier path out of this. But ASX shares that rely on growth of the economies of China and the US may yet see a wobble later this year.

I’m being more careful with my ASX share buying, but I do intend to keep investing for the long-term.

More reading

• The 10 shares that significantly move the ASX 200 index
• Telstra shares and 2 other ASX companies to buy in a low-interest rate world
• 3 ASX dividend shares with big yields above 9%
• 3 top ETFs you can easily diversify your portfolio with immediately
• Are Megaport shares the ones to buy and hold beyond 2030?

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO and ZIPCOLTD FPO. The Motley Fool Australia has recommended Sezzle Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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