Indices — the whole market in one basket

The Markets and Their Instruments — Lesson 4 of 7

An index is not a company but a basket measuring the performance of a group of shares together. When you hear “the Nasdaq rose 1%”, it means the average of its constituent companies rose by that much. Trading an index means taking a view on an entire economy or sector rather than on one company.

The best-known indices

Index	What it represents	Character
S&P 500	500 large US companies	the benchmark for the US market
NASDAQ 100	100 companies, mostly technology	the fastest-moving and most volatile
Dow Jones 30	30 long-established industrial companies	the calmest and most traditional
DAX 40	Germany’s largest companies	a mirror of the European economy
Nikkei 225	Japanese companies	strongly affected by the yen

04 — Lesson 4 of 7

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