Index
An index is a way of tracking the performance of a group of shares.
Quick reference:
Examples: ASX200, All Ordinaries. Purpose: Shows market or sector performance
Used for: Benchmarks, ETFs, market news.
Expanded explanation:
Instead of looking at one company, an index combines many companies into a single number. The ASX200 for example, measures the share price of the 200 largest companies in Australia. If the ASX200 rises, it means those companies in total are worth more. If it falls, they are worth less.
Indexes are used as a quick snapshot of how the market is doing overall. They also form the basis of many ETFs, which simply track the performance of an index to give investors broad exposure.
Related links + Articles:
• ETF.