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What are indices?

Indices are a measurement of price of a certain set of securities listed on an exchange. Indices are also called an index. Very commonly known indices are:

  • S&P 500
  • US30
  • Nasdaq
  • Dow Jones
  • Euro Stoxx 50
  • Etc

All these indices track a specific type of stock mostly based on size or market capitalization (current stock price * amount of outstanding shares). Companies can go in and out of indices many times. Most indices track the biggest companies. If a company goes bankrupt or loses a lot of net worth, the company leaves the index and another company takes its spot. When an ETF or mutual fund tracks an index, it tracks an indice.

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