A stock index is a defined list of companies combined by a weighting rule, such as by market value, share price, or equally. It produces a number that measures how the basket behaves; it is a rule set and a measurement, not a tradable portfolio.
How it works
The index defines which companies are included, how they are weighted, and how often the basket is rebalanced.
The weighting method decides which members actually drive the number, so the same list of companies can behave differently under different rules.
Why it matters
You cannot buy an index directly; you can only buy a product that tries to track it, such as an ETF.
Reading an index means checking its weighting method first, because that decides how concentrated the movement is.
A simple market example
Two indices hold the same 100 companies. One weights by market value, the other equally, and their behavior diverges because cap-weighting hands most influence to the largest companies.
Common mistakes
Treating the index as something you can buy directly.
Comparing indices or funds without checking the weighting method.
Frequently asked questions
Can I invest in an index?
Not directly. You invest in a product that tracks it, like an ETF, which adds fees and tracking differences.
Why do two indices with the same companies differ?
Because their weighting rules hand influence to different members.
Is a stock index the same as an ETF?
No. An index is a rule set; an ETF is a tradable product that tries to follow that rule set.
Educational content only. Definitions describe common market usage and may vary by jurisdiction, instrument, or institution.