Market index
Also called: stock index, S&P 500, Dow Jones, Nasdaq Composite
A market index is a number that tracks the combined price of a set group of stocks, such as the S&P 500 (500 large US companies), to show how that part of the market is doing.
Most major indexes are weighted by market capitalisation, so bigger companies move them more. The Dow Jones Industrial Average is an exception, weighted by share price.
Related terms
- Index fund: An index fund is a fund that buys every stock in a market index, such as the S&P 500, in the same proportions, so it matches the market's return instead of trying to beat it.
- ETF (exchange-traded fund): An ETF is a fund that holds a basket of investments, such as all the stocks in an index, and trades on an exchange like a single stock.
- Market capitalization: Market capitalization is the total value of a company's shares: the share price multiplied by the number of shares outstanding.
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