Stock index

What is a stock index?

A stock market index is a measure of the overall value of the stock market (or a sector) based on average prices. It is a weighted average, so higher-value stocks have a higher weight and have a higher influence on the index than low-priced stocks.

Where have you heard of stock indices?

Investors use stock indices to describe the state of the market and compare the returns of multiple investments. The index is also used to discuss economic soundness. You may have heard FTSE 100 index and dow Jones index.

Information you need to know about stock indices...

You cannot invest directly in a stock market index because it is only a measure of value, not an actual asset. However, you can invest in index funds that "track" specific indices. Investors can use stock indices to assess the overall performance of the market or the relative performance of specific stocks.

Some equity indices are global (such as the S & P Global 100) and track the performance of large multinational companies across regions. Other indices focus on specific regions, such as the FTSE Developed Markets Asia Pacific Index. There are also national indices such as the FTSE 100 or Dow Jones, which only track companies listed in a particular country.

In addition, there are indices based on stocks listed on a particular exchange (e. G., The NASDAQ 100) and indices based on stocks listed on multiple exchanges, such european Stock Exchange 100 index. There are also specialized indices that track only companies in specific industries, such as biotechnology or real estate.