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A market index combines several stocks to create one aggregate value that’s used to measure a market’s or sector’s performance.

A market index represents an entire stock market, providing a benchmark to track a market’s changes over time. Investors use index values to follow market trends and other developments.

The Standard & Poor’s 500 Index combines 500 large-cap U.S. stocks into one index value. The S&P 500 is weighted for market capitalization, which means larger companies with more outstanding shares will have a greater impact on the index’s performance than smaller companies.

The S&P 500 gives investors a benchmark against which they can compare their own portfolio performance. Many investors also invest in an index-tracking instrument, such as an exchange-traded fund, which is comprised of the same stocks that make up a certain index. Its performance will mirror the index’s.

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