A stock market index shows how investors feel an economy is faring. An index collects data from a variety of companies across industries. Together, that data forms a picture that helps investors compare current price levels with past prices to calculate market performance.
Some indices focus on a smaller subset of the market. For example, the Nasdaq stock index closely tracks the technology sector. So if you want to know how technology companies are performing, you’d want to look at the Nasdaq index.
Indices also vary in size, with some tracking just a handful of stocks and others looking at thousands. Each index serves a unique purpose because different investors are interested in different sectors.
