What is index

What is index

It is very complicated to track every single security that is traded in the financial market, so we take a smaller sample of the market which is representative of the entire market. That small sample is called an index, which is a statistical measure of change in stock portfolio representing a portion of the entire market. Investors and other market players’ use indexes to track the performance of the market. Ideally, a change in the price of the index shows a perfectly proportional change in the stock involved in that index. For example if the index increases by 1%, this means that the stocks in the index has increased by an average of 1%.