What are indices?

Indices are the plural form of an index and before discussing different
types of stock market indices, let’s have a look at what an “Index” is.
It is a statistical indicator which shows changes in the economy.
In terms of financial markets, an index can be explained as a portfolio
of securities representing a particular market of a segment of the market.

In simpler terms, let’s say “A” is a set collection of 50 stocks having
a large volume and traded every day; it is an index covering 50 stocks
or in other words, these 50 stocks are used as an index and determine the
movement of the market.

A stock index is an indicator of the overall performance of the marketplace
or a single sector. It acts as a benchmark for portfolios performance.
These portfolios belonging either to individuals or mutual funds use this
index to measure for appraisal of their performance. Our recommendations
are once you have selected one, spend some time researching the
constituents with sectors that are in there, the type of market, the type of
companies quoted there, the volatility of these firms, and news flows.

DAX, Dow-Jones, and FTSE are some of the magical words you observe
every day on your television’s newsfeed. For investors, these are not
mesmerizing anymore as any change in their value brings stress for
them and brokers. These changes also impact policymakers to
implement changes in their economies.