Index

An index is a benchmark value of the performance and relative health of a given market or sector of the economy. Its value represents the aggregated performance of all the stocks that comprise it. For example, the S&P 500, which is one of the most popular benchmarks of the U.S stock market, tracks the value of 500 of the largest American companies and represents around 75% of the American equity market. Although each index has its own calculation methodology, investors evaluate the percentage that an index rises or falls above or below its base value. Indices enable investors to speculate on a specific market and are thus extremely popular with investors seeking to take positions on the changing fortunes of the economic sectors represented by indices.