Index

An index is a tool that tracks the performance of a group of assets, such as stocks or bonds. In simple terms, an index shows how a selected group of investments is moving. Indexes are important because they help investors quickly understand the overall direction of a market, sector, or economy. When an index rises, it usually means the group it tracks is going up on average. For example, the S&P 500 is an index that tracks 500 large U.S. companies, while the Nasdaq Composite tracks many stocks listed on the Nasdaq exchange. An index is not something most people buy directly. Investors usually buy index funds or ETFs that are designed to follow an index.