A stock index is a group of stocks that can be bought and sold as a single tradable instrument. Now, some traders speculate on how the price of a single asset will change, and some traders choose to speculate with stock indices. Taken as a whole, stock indexes can be used to indicate the health of an industry or even a country.
However, classifying stock indices is a bit more complicated. Some indices, such as the DAX 30, are a group of the 30 best-performing companies in Germany. It is classified as a “national stock index” and indicates the health of the German stock market.
A stock index, on the other hand, is not only made up of stocks that are grouped together because of their geographic location. Some stock indexes represent and track the performance of certain sectors of the market. For example, the Nasdaq 100 Index tracks the performance of all companies listed on the Nasdaq exchange. The NASDAQ index is typically of technology-related companies, and it reflects the health of the U.S. technology industry.