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TradingView's Spark Index Tracks Fintech Industries

The fintech industry has always been destined for success, evidenced by the industry’s developing trends, like neobanking, digital assets, and digital payments.

Investments in these businesses hit a new high of $210 billion by the end of 2021, up from a record $98 billion in the first half of the year. Investors who want to profit from fintech startups must consider the entire industry's performance. TradingView's new index tracks the health and direction of publicly listed companies worldwide, which helps influence investment decisions in many ways.

TradingView's Global Fintech Index

TradingView has created a Global Fintech index to track the performance of major public fintech companies. The index serves as a benchmark for traders and investors to measure the value of listed financial technology stocks.

The index can be easily assessed from the TradingView app and is calculated daily using the stock prices of fintech companies. The components are weighted by market capitalization. To be included, companies must operate in the fintech industry, have high liquidity, trade on a major exchange, and have a market cap above $500 million.

The goal of the new index is to provide a barometer for assessing fintech as an investment theme. Traders can use it to gauge momentum in the sector and inform trading strategies and decisions.

Reasons the Spark Index Is Important

Measures Health of the Overall Fintech Industry

A single standardized indicator, such as the Spark index, gives a bird's eye perspective of the whole Fintech public market. Instead of seeking to draw inferences from diverse individual stock movements, the composite index captures the industry's overall health and momentum.

The Spark index shows fintech stocks have delivered great returns. Over the past year, the index returned 26.91%. Although the industry is currently down 23% from its highest point in 2021, it has gained an impressive 105.31% over five years. 

If the index rises, it indicates a positive environment for fintech businesses. The index also provides a comparable benchmark to evaluate alternative investments. Compared to other parts of tech, fintech is still behind. The Nasdaq index that includes AI stocks fuelled by Nvidia has done 20% better so far this year.

However, fintech is doing better than old banks and financial companies. Global banking stocks only grew 3% year-to-date, while fintech grew 17%. 

The index can also serve as a benchmark to assess the performance of actively managed fintech funds. Comparing returns to the index reveals managers' ability to outperform the overall public fintech market.

Tracks Leading Global Fintech Firms

The Spark index has strict rules about which fintech stocks can be included. To qualify, a company must have a market value of at least $500 million when the index was made. This means only the biggest fintech players make the cut — giants like PayPal, Wise, and Visa.

Currently, only 65 companies meet the criteria to represent the wider fintech space. On the TradingView page for the index, you can easily click each company's symbol to compare individual performance year-to-date, making it simple to track heavyweights in the industry.

A drawback is that smaller up-and-coming fintech firms get left out of the Spark index. There is no way to check benchmarks for less established players or recent IPOs. Only the largest market cap leaders make the cut.

Accounts for Shifts in Fintech Valuations

Unlike equal-weighted indexes, the Spark index members are weighted by market capitalization, giving the most proportionate weight to firms with the greatest market capitalization. Visa, for example, presently contributes more than 7% of the index due to its position as the most valuable fintech company.

As constituent values vary on a daily basis due to stock price fluctuations, their weights within the index adjust dynamically. This implies that the index continuously reflects evolving market evaluations of particular fintech leaders.

Impact of Macroeconomic Conditions

The performance of the fintech industry does not exist in a vacuum. Broader economic conditions influence the financial health and stock prices of fintech companies.

When analyzing the Global Fintech Index, it is important to consider factors like interest rates, inflation, consumer spending, and business investment. In times of economic growth and low rates, fintech stocks may outperform as consumers and businesses embrace digital financial services.

However, in periods of high inflation or economic contraction, fintech companies may struggle like other parts of the market. Their valuations and stock prices often decline during recessions as profits drop.

Comparing the index to economic indicators helps determine how much fintech industry performance depends on the underlying macroeconomic environment versus company-specific factors.

Applications for Investors

Return Expectations

The Spark index's historical annual returns of 26.91% over one year and 105.31% over five years provide a baseline of what's achievable for fintech portfolios. Traders can evaluate if more speculative bets warrant the elevated risk compared to index averages; this enables traders to set realistic objectives scaled to risk appetites.

Investors can use the index's historical returns as a starting point when predicting expected returns and risk for fintech assets.

Portfolio Diversification

The subsectors represented in the index allow using it as a diversification tool. Investors should have a manageable amount of highly correlated assets in their portfolios for maximum risk management.

Individual Picks

Investors can easily compare holdings against the wider index returns. Outperformance signals a company gaining competitive share rapidly. Lagging the index may indicate internal issues or external threats worth reviewing closely. It provides a broader context beyond daily stock swings.

Investor Interest

Rapid gains in the Spark index over time signify a rise in investor appetite and flows toward fintech assets. Rising and falling index values can demonstrate if investor sentiment and capital flows are rotating toward or away from fintech stocks. This gauges the investment climate for new fintech IPOs and funding.

Comparing the fintech index performance to broader market indexes helps discern if fintech is leading, lagging or moving in line with the overall market. This reveals investor preference.

Comparing the Global Fintech Index With Other Markets

The best trades require careful research and commitment. Generally, investors would want to periodically compare the global fintech index with other markets just to get a good idea of how the industry is doing. For example, the fintech index can be benchmarked against broad market indexes like the S&P 500 to gauge if fintech is over or underperforming the overall equity market. This index can help investors get a clearer picture of the performance, allowing for better investment decisions, which has always been the goal for TradingView.

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Andrew Gosselin CPA

Written by Andrew Gosselin CPA

Andrew Gosselin, CPA is a former senior strategy consultant for a global, multi-billion-dollar software company. He is the Senior Contributor / Editor at MoneyInc, and he holds degrees in accounting, finance, and international business from Bentley University, where he played varsity basketball and was the Lead Tutor of the accounting and finance curriculum for the Bentley Athletic Department. Andrew was named a President's Academic Scholar and was inducted into the Falcon Society, a distinction awarded by the Bentley faculty and his peers for being among those with the highest achievement and abilities in his graduating class.

Read more posts by Andrew Gosselin CPA

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