Index

Beginner
Aktualisiert Jul 24, 2026

What Is an Index?

An index is a system that measures the value of something in contrast to its previous values or another defined standard or benchmark. In finance, it is a tool used to represent a group of individual prices or data points as a single value. An index is usually calculated from an array of prices and quantities over a certain period, which makes it a convenient way to track the price of a given asset or basket of assets.

Within financial markets, indexes are often based on a list of stock quotes and are commonly used to track the performance of a market. Each index acts as a small sample that aims to represent a larger portion of the market as a whole. This idea applies to both traditional equities and digital assets, so it can be a useful concept when comparing crypto versus stocks.

How Stock Market Indexes Work

Each index follows a particular set of rules and a calculation methodology. Ideally, the value change of an index should reflect a proportional change in its underlying components. For example, a 5% move in an index would represent an average change of 5% across the assets included in its calculation.

The Dow Jones Industrial Average (DJIA) and the S&P 500 are among the most well-known financial indexes. The DJIA tracks the performance of 30 large “blue-chip” US companies. Its calculation originally used a simple arithmetic average, but the divisor has been adjusted many times to reflect structural changes such as stock splits, so it is now a price-weighted index. It is often criticized for its small sample and for not considering the market capitalization of its components.

The S&P 500 tracks 500 large US companies using a market-cap weighting methodology, with a committee selecting the components. Many consider it a more representative gauge of the US stock market than the DJIA. Other examples include the FTSE 100, which measures the top 100 companies on the London Stock Exchange by market capitalization, and the German DAX, which tracks major companies traded on the Frankfurt Stock Exchange.

Index Funds and Crypto Indexes

It is generally not possible to invest directly in an index. Instead, index funds allow individuals to gain exposure that tracks an index’s performance. For instance, an S&P 500 index fund aims to mirror the returns of the S&P 500. This passive approach has historically been popular because it can offer broad diversification at a relatively low cost.
The same concept has been adapted for digital assets. A crypto index fund tracks a basket of cryptocurrencies rather than a single coin, so investors can potentially have more exposure across the market. Whether tracking equities or crypto, an index serves more as a measurement tool rather than a recommendation, and investors would typically combine it with fundamental analysis when researching any asset.
Learn more: Asset Allocation and Diversification Explained
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