Markets
A stock index is a figure that tracks the performance of a defined basket of shares, such as the DAX, MSCI World or S&P 500, serving as a market barometer and as the basis for index tracker ETFs.
A stock index condenses a defined basket of shares into a single figure and tracks how that basket performs over time. Rather than following many individual share prices, one number shows at a glance how a market or market segment has developed as a whole.
Well-known examples include the DAX for large German companies, the MSCI World for developed markets worldwide and the S&P 500 for the US market. In this role an index acts as a market barometer: it indicates whether the shares it covers have risen or fallen in aggregate.
A stock index is also the basis for index tracker ETFs, which replicate the index in question. Investors are therefore not buying the index itself but a product designed to mirror its composition as closely as possible.
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