What is an index?

In financial markets, an index is some or all of securities the overall value change indicator. An index can form a portfolio in which the weight of each security depends on its market importance.

Where have you heard of index funds?

It's possible everywhere. As an investor, you will always keep an eye on index movements during the trading day and beyond. You can invest in financial products linked to an index.

What you need to know about index funds...

Indexes are designed to provide an indicator of sentiment and performance in a particular market, adding up all positive and negative movements for each individual security to arrive at a total upside or downside.

Notable indices include U. S. Dow Jones Industrial Average and S & P 500 Index, London FTSE 100 index, Germany frankfurt index and Japan's Nikkei 225 Index.

"Tracker" mutual funds and exchange-traded funds are designed to reflect the composition of the index in question. Indices are also used as benchmarks to measure the performance of fund managers.