Začínáme s investováním
What Is a Stock Market Index — Explained Simply
Key takeaways
- A stock market index is a list of selected shares whose combined value shows how they are doing overall.
- The S&P 500 tracks the 500 largest US companies; MSCI World covers thousands of companies from around the world.
- An ETF that tracks an index lets you invest in all its companies at once — cheaply and simply.
- You cannot buy an index directly — you invest through an ETF or fund that follows the index.
A stock market index is a list of selected shares whose combined value shows how those shares are doing as a whole.
What exactly does an index measure?
Think of it as an economic thermometer. An index says: "These 500 largest US companies are collectively rising or falling." You do not look at each company separately — you see one number that describes the whole market or a part of it.
The index value changes every day based on how the companies in it are doing. If most are rising, the index rises. If they are falling, the index falls. One simple number, a great deal of information.
The most well-known global indices
- S&P 500 — 500 of the largest US companies (Apple, Microsoft, Amazon…). The US market accounts for over 60% of world equity market capitalisation. Read more in the article What is the S&P 500.
- MSCI World — over 1,400 companies from 23 developed countries. US companies make up roughly two thirds.
- FTSE All-World — similar to MSCI World but includes emerging markets (China, India, Brazil…), over 4,000 companies in total.
- NASDAQ 100 — the 100 largest technology companies listed on the US Nasdaq exchange.
How is an index created and how does it change?
An index is compiled and managed by a specialist firm (e.g. MSCI, S&P Global, FTSE Russell). It sets the rules: companies are selected based on market capitalisation (total exchange value), liquidity and other criteria. The index is updated regularly (usually quarterly) — weaker companies drop out, stronger ones enter. Changes to the index are automatically reflected in the ETF that tracks it.
Why invest through an index rather than picking stocks yourself?
Studies have repeatedly shown that the overwhelming majority of active investors and fund managers fail to beat the index over the long run. An index is impartial, cheap and automatic. More on this topic in the article Active vs. passive investing — which wins in the long run?
FAQ
Can I buy an index directly, or only an ETF?
You cannot buy the index itself — it is just a number, a mathematical calculation. You invest in an ETF or mutual fund that tracks (replicates) the index. ETFs are the most accessible and cheapest way for retail investors to use index investing.
What is the difference between an index and an index fund (ETF)?
An index is a list with rules — it specifies which shares belong in it and in what proportion. An ETF is a real financial product that actually buys and holds those shares. When the index rises by 5%, an ETF tracking that index rises by approximately 5% minus a small fee (TER).
Is MSCI World "the whole world"?
Not quite. MSCI World covers only developed markets (advanced economies). Emerging markets such as China, India or Brazil are included in a different index — MSCI Emerging Markets. If you truly want the whole world, look for FTSE All-World or MSCI ACWI, which combine both groups.