Composite Index

What is a 'Composite Index'

A composite index is 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".

BREAKING DOWN '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. NASDAQ Global Select Market Composite

    A market capitalization-weighted index made up of U.S.-based ...
  2. NYSE Composite Index

    An index that measures the performance of all stocks listed on ...
  3. Composite Index of Coincident Indicators

    An index published by the Conference Board that is a broad-based ...
  4. S&P/TSX Composite Index

    The Canadian equivalent to the S&P 500 market index in the ...
  5. S&P Phenomenon

    The tendency for a stock that has been recently added to the ...
  6. Value Line Index

    A stock index containing approximately 1,675 companies from the ...
Related Articles
  1. Markets

    Understanding Capitalization-Weighted Indexes

    A capitalization-weighted index is a market index whose individual components are weighted according to their market capitalization.
  2. Mutual Funds & ETFs

    Index Investing: Other Indexes

    We've covered most of the big U.S. indexes, but we've barely scratched the surface of all the other indexes in the world. There are literally thousands of indexes tracking nearly any market. ...
  3. Markets

    The 2000 Nasdaq vs. The 2015 Shanghai Composite: How History Repeats Itself

    The Shanghai Composite is in a correction, and it's very similar to the NASDAQ of 2000.
  4. Economics

    The ABCs Of Stock Indexes

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

    Index Investing: What Is An Index?

    An index is a statistical measure of the changes in a portfolio of stocks representing a portion of the overall market. It would be too difficult to track every single security trading in the ...
  6. Mutual Funds & ETFs

    The 4 Best U.S. Large Cap Index Mutual Funds

    Discover the top four mutual funds that use passive investment approaches and follow stock indexes composed of U.S. large-cap equities.
  7. Mutual Funds & ETFs

    Benchmark Your Returns With Indexes

    If your portfolio is always falling short, you may not be making an apples-to-apples comparison.
  8. Fundamental Analysis

    Investment Fundamentals: S&P 500 Index Vs. Russell 1000 Index

    Learn about the similarities and differences between the S&P 500 and the Russell 1000 indices, and discover why investors may choose one over the other.
  9. Mutual Funds & ETFs

    Index Investing

    Get to know the most important market indices and the pros and cons of investing in them.
  10. Mutual Funds & ETFs

    5 Reasons To Avoid Index Funds

    Indexes are a hands-off way for investors to access the markets, but in some cases, nothing beats active investing.
RELATED FAQS
  1. What are the most important equity market indexes?

    Discover the most important equity market indexes. Stock market indexes are tools to evaluate the performance of the stock ... Read Answer >>
  2. What are the most common market indicators to follow the Chinese stock market and ...

    Learn the most commonly followed market and economic indicators used by market analysts to track the Chinese stock market ... Read Answer >>
  3. What is the best way to measure the total market?

    There is a variety of market indices which function as statistical gauges of the market's activities. Many investors look ... Read Answer >>
  4. What are the main benchmarks that track the performance of the financial services ...

    Learn about some of the primary benchmarks utilized by investors and analysts to track the performance of the financial services ... Read Answer >>
  5. What are the pros and cons of using the S&P 500 as a benchmark?

    Learn about the advantages and disadvantages of using the S&P 500 as a benchmark for portfolio performance, and understand ... Read Answer >>
  6. How do you compare the Dow Jones Industrial Average (DJIA) and the Toronto Stock ...

    See how the Dow Jones Industrial Average and TSX Composite move according to factors in their respective countries and from ... Read Answer >>
Hot Definitions
  1. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  2. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  4. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  5. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  6. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
Trading Center