What is an index?

Updated by Laurène

An index is a virtual combination of a bunch of investment products (e.g. stocks). 

With this combination or bundle of products, it is easier to follow a specific market. For example, the Swiss SMI Index includes the shares of the 20 largest companies in Switzerland. By looking at the index you can get an idea of how the Swiss market is doing.

An index often combines different shares to represent a stock market. E.g. the S&P index covers the 500 largest companies in the US. But there are also indexes that combine bonds or commodities.

ETFs track an index and thus cover an investment in all the investment products that are included in that index. With an investment in an S&P 500 ETF you invest into the 500 US-based companies that are included in the index. You can read more about ETFs here.

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