6 – L1 04 Indices Describe The Market V2

Indices may track stocks within a specific stock exchange or country. For example the CSI 300 includes stocks that are listed on the Shanghai and Shenzhen Stock Exchanges in China. Stocks can also be related by sector for example the Nasdaq 100 technology index or Nasdaq financial 100 index track the performance of stocks in their respective sectors. Indices are important to investors because at a glance we can quickly check the status of various markets. In a way it’s checking the pulse of a region or sector to evaluate the health of that market. Professional investment managers also use indices as benchmarks that they either tried to match or outperform with their own portfolios.