I have read the definition numerous times, but I need some clarity on what exactly a stock index is and how investors use index’s to compare to their portfolio performance. Also how do people compare an index performance to a mutual fund? Thank you
stock market index is a listing of a group of stocks, and a number to go with them. The number that goes with them is used to track trends in the market, going up or down when the market does. In general the stocks have something in common, such as trading on the same exchange, or belonging to the same industry. The Indexes can be classified in a wide variety of ways. The most widely quoted Index in the world, the Dow Jones Industrial Average, is a broad based index designed to reflect the stock market as a whole and give an idea of investor sentiment on the state of the economy.