what are indexes

An index is a financial tool that measures the performance of a group of securities, derivatives, or other financial instruments that represent a specific market, asset class, market sector, or investment strategy. It is used to track the performance of a group of assets in a standardized way. The first documented index was created in 1884 by Charles Dow and Edward Davis Jones, and it included a simple market average based on 11 companies primarily from the railway sector to help readers understand if the overall market was advancing or retreating. Today, indexes are used in finance to track a statistical measure of change in various security prices. They typically measure the performance of a basket of securities intended to replicate a certain area of the market, such as the S&P 500 or Dow Jones Industrial Average. An index is investable and transparent, and investors may be able to invest in a stock market index by buying an index fund, which is structured as either a mutual fund or an exchange-traded fund, and "track" an index. Knowing the difference between an index and an index-linked investment product is crucial for understanding the nature and role of both indices and the investment products that track them.