What is an index?

So the idea of the investment glossary is to open a word related to the investment every week, which is usually just name-dropped without its clearer explanations. This week it’s the turn of the index!

INDEX = a figure that measures the price development of shares

A stock index can be any number of stocks. By following the index of a certain set of shares, it becomes clear how the price level of these shares has developed on average.

An example of a stock index is SP500, which is a list of 500 large U.S. companies with a market capitalization. In practice, the S&P 500 list corresponds quite closely to the list of the largest companies in the country and indicates how the US stock market is generally doing.

You can’t invest in the index itself (because it’s just a number), but some funds invest according to the index. These are called index funds (SHOCKING).

The index fund therefore automatically buys shares belonging to a predetermined index. It also picks up shares with the same weight, making it the most popular stock on the US stock exchange, for example, in the post-SP500 index fund.

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