What is Index

An index is a tool used to summarize the behavior of several assets in a single value. It acts as the benchmark that individual assets could be compared against to evaluate how well they’re doing in the market.

An index can reflect the status of all the assets in an entire market or in a specific industry or market sector. Two of the most prominent indices in the United States are S&P 500 and DJIA.

Indices are calculated in different ways, but usually they have a proportional relationship with the market prices of the assets. In other words, a percent variation in an index is accompanied by an almost equivalent percent variation in the price of all the stocks used for the calculation of the index.