Composite Index

AAA

DEFINITION of 'Composite Index'

A grouping of equities, indexes or other factors combined in a standardized way, providing a useful statistical measure of overall market or sector performance over time.

Also known simply as a "composite".

INVESTOPEDIA EXPLAINS 'Composite Index'

Usually, a composite index has a large number of factors which are averaged together to form a product representative of an overall market or sector. For example, the Nasdaq Composite index is a market capitalization-weighted grouping of approximately 5,000 stocks listed on the Nasdaq market. These indexes are useful tools for measuring and tracking price level changes to an entire stock market or sector. Therefore, they provide a useful benchmark against which to measure an investor's portfolio. The goal of a well diversified portfolio is usually to outperform the main composite indexes.

RELATED TERMS
  1. CBOE Nasdaq Volatility Index - ...

    A measure of market expectations of 30-day volatility for the ...
  2. Capped Index

    An equity index that has a limit on the weight of any single ...
  3. Index

    A statistical measure of change in an economy or a securities ...
  4. Standard & Poor's 500 Index - S&P ...

    An index of 500 stocks chosen for market size, liquidity and ...
  5. Dow Jones AIG Commodity Index - ...

    A rolling commodities index composed of futures contracts on ...
  6. Goldman Sachs Commodity Index - ...

    A composite index of commodity sector returns which represents ...
RELATED FAQS
  1. How does the risk of investing in the electronics sector compare to the broader market?

    The risk of investing in the electronics sector closely approximates the risk of investing in the broader market. The electronics ... Read Full Answer >>
  2. How do markets account for systematic risk?

    Systematic risks provide markets with an unpleasant quandary. Economists, policy makers, directors, fund managers and investors ... Read Full Answer >>
  3. What stage of the economic cycle is usually the best for an investor to enter the ...

    The best time during the economic cycle for an investor to enter the electronics sector is when he has confidently identified ... Read Full Answer >>
  4. How do S&P 500 futures work?

    S&P 500 futures are a type of capital asset contract that provides a buyer the right to a predetermined selection of ... Read Full Answer >>
  5. Can I use the current yield to compare a bond to an equity investment?

    Investors should be careful when comparing the current yield on a debt security with the growth of an equity security. Yield ... Read Full Answer >>
  6. What types of stocks have a large difference between bid and ask prices?

    The bid-ask spread is the difference between the highest offered purchase price and the lowest offered sales price for a ... Read Full Answer >>
Related Articles
  1. Investing Basics

    An Introduction To Stock Market Indexes

    Investopedia explains the five most talked about indexes and what makes them all different.
  2. Economics

    The ABCs Of Stock Indexes

    Indexes can track market trends, but they're not always reliable. Can you trust them?
  3. Mutual Funds & ETFs

    Index Investing

    Get to know the most important market indices and the pros and cons of investing in them.
  4. Investing Basics

    What's the Primary Market?

    The primary markets are where investors can get first crack at a new security issuance.
  5. Investing Basics

    What is the Coupon?

    In the financial world, “coupon” represents the interest rate on a bond.
  6. Investing Basics

    Explaining the Coupon Rate

    Coupon rate is the stated interest rate on a fixed income security.
  7. Investing Basics

    What is Cyclical Stock?

    A cyclical stock is an equity security whose price is affected by ups and downs in the overall economy.
  8. Investing Basics

    What are Ordinary Shares?

    Ordinary shares are any type of shares that are not preferred and don’t pay any type of predetermined dividend amount.
  9. Investing Basics

    Explaining the Spot Rate

    The spot rate is the immediate purchase price posted on exchanges for purchasing commodities, currency and securities.
  10. Investing Basics

    Understanding Redemption

    In the investing world, redemption refers to cashing out the value of bonds or mutual funds.

You May Also Like

Hot Definitions
  1. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  2. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  3. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  4. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
  5. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
Trading Center