GLOSSARY TERM
Index
An index is a list or measure that tracks the performance of a group of investments, such as stocks or bonds.
What does this mean in practice?
An index is used to show how a market or part of a market is performing. It can include a small number of companies or thousands of them. Some indexes follow large US companies, others track global stocks, European stocks or bond markets. You cannot usually invest directly in an index itself, but you can invest in a fund or ETF that aims to follow it.
Example
A world stock index tracks the value of many companies from different countries. A US example is the S&P 500 Index, which tracks 500 large American companies. A European example is the STOXX Europe 600 Index, which tracks 600 companies from different European countries. If these indexes rise, it means the overall value of the companies inside them has gone up.
Why it matters
Indexes make it easier to invest simply and broadly. Many long-term investors use index funds or ETFs because they offer diversification, low costs and a clear way to follow the market instead of trying to pick individual winners.
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