Index

Dictionary Says

Definition of 'Index'

A statistical measure of change in an economy or a securities market. In the case of financial markets, an index is an imaginary portfolio of securities representing a particular market or a portion of it. Each index has its own calculation methodology and is usually expressed in terms of a change from a base value. Thus, the percentage change is more important than the actual numeric value.

Stock and bond market indexes are used to construct index mutual funds and exchange-traded funds (ETFs) whose portfolios mirror the components of the index.
Investopedia Says

Investopedia explains 'Index'

The Standard & Poor's 500 is one of the world's best known indexes, and is the most commonly used benchmark for the stock market. Other prominent indexes include the DJ Wilshire 5000 (total stock market), the MSCI EAFE (foreign stocks in Europe, Australasia, Far East) and the Lehman Brothers Aggregate Bond Index (total bond market).

Because, technically, you can't actually invest in an index, index mutual funds and exchange-traded funds (based on indexes) allow investors to invest in securities representing broad market segments and/or the total market. 

Related Definitions

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    A stock index that represents 30 of the largest and most liquid German companies that trade on the Frankfurt Exchange. The prices used to calculate the DAX Index come through Xetra, an ...
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  • Dow Jones Industrial Average - DJIA

    The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq. The DJIA was invented by Charles Dow back in ...
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  • Dow Jones Transportation Average - DJTA

    The Dow Jones Transportation Average is a price-weighted average of 20 transportation stocks traded in the United States. The average was started back in 1884.
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    • Dow Jones Utility Average - DJUA

      The Dow Jones Utility Average is a price-weighted average of 15 utility stocks traded in the United States. The DJUA was started back in 1929.
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    • Exchange-Traded Fund - ETF

      A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. ETFs experience price changes throughout the day as they ...
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    • FTSE

      A company that specializes in index calculation. Although not part of a stock exchange, co-owners include the London Stock Exchange and the Financial Times.
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    • E-Mini

      An electronically traded futures contract on the Chicago Mercantile Exchange that represents a portion of the normal futures contracts. E-mini contracts are available on a wide range of ...
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    • Index Arbitrage

      An investment strategy that attempts to profit from the differences between actual and theoretical futures prices of the same stock index. This is done by simultaneously buying (or ...
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    • Index Fund

      A type of mutual fund with a portfolio constructed to match or track the components of a market index, such as the Standard & Poor's 500 Index (S&P 500). An index mutual fund is said to ...
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    • Index Futures

      A futures contract on a stock or financial index. For each index there may be a different multiple for determining the price of the futures contract.
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    • Index Hugger

      A managed mutual fund that tends to perform much like a benchmark index such as the S&P 500, which gives it the reputation of being a "closet index fund."The majority of actively managed ...
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    • Index Option

      A financial derivative that gives the holder the right, but not the obligation, to buy or sell a basket of stocks, such as the S&P 500, at an agreed-upon price and before a certain date. ...
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    • Passive Management

      A style of management associated with mutual and exchange-traded funds (ETF) where a fund's portfolio mirrors a market index. Passive management is the opposite of active management in ...
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    • Standard & Poor's 500 Index - S&P 500

      An index of 500 stocks chosen for market size, liquidity and industry grouping, among other factors. The S&P 500 is designed to be a leading indicator of U.S. equities and is meant to ...
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    • Wilshire 5000 Total Market Index - TMWX

      A market capitalization-weighted index composed of more than 6,700 publicly-traded companies that meet the following criteria:1. The companies are headquartered in the United States.2. ...
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