What is an index?

An index is an aggregated security that tracks the performance of a collection of companies or assets. An example is the FTSE 100, which tracks the performance of the top 100 companies on the London Stock Exchange (LSE).

Investors can buy shares of index funds that deliver returns based on an indexes’ performance. Indexes come in a variety of forms, such as tracking top companies by market cap, or for specific sectors, such as agriculture, energy or manufacturing. Indexes are also used as benchmarks for tracking how well stocks in individual companies are performing compared to the wider market.