Finance: Defining an Index

BUSINESS

Finance:

LegacyFX Introduction

DEFINING AN INDEX

FINANCE: DEFINING AN INDEX

In finance, an index is a method that can be used to track performance of a group of assets. An index offers a standardised metric that can be used to judge market performance in a specific category or sector.

Indexes typically measure a basket of the most commonly traded assets within a certain area of the market.

Measuring Price Performance Indexes are used to measure the price performance across a market and can be used by investors as a benchmark by which to measure the relative success of their own portfolio.

Some indexes such as the Dow Jones Industrial Average measure entire market performance, while others are more specialised and specific to a certain market.

Passive Index Investing A popular strategy in modern investing is known as passive index investing, in which the investor attempts to replicate the returns of some of the most popular indexes. This is known as passive investing as the investor is not trying to outperform the index but merely to replicate the same levels of returns.

INDEXES TYPICALLY MEASURE A BASKET OF THE MOST COMMONLY TRADED ASSETS WITHIN A CERTAIN AREA OF THE MARKET.

You can learn more about trading indices using contracts for difference by visiting the LegacyFX blog.