Getting started and index basics
What is a stock index?
3 min
A stock index is a single number that tracks the combined performance of a basket of selected stocks. It is a thermometer for a whole market or sector, letting you say "the market was up today" in one figure.
How an index works
An index picks a set of stocks by some rule and weights them — usually by company size or trading volume — into one running value. When the index rises, the basket as a whole gained value; when it falls, it lost. You cannot buy "the index" directly (it is just a calculation), but you can track it and, via ETFs, invest in something that mirrors it.
The two you must know
- Ibovespa (IBOV) — the main index of the Brazilian market, made up of the most-traded stocks on B3, weighted by their trading liquidity. It is the headline number for "how Brazilian stocks did today."
- S&P 500 — an index of about 500 of the largest US companies, weighted by market value. It is the most-watched gauge of the US stock market. (You will also hear of the Dow Jones and the Nasdaq Composite, two other US indices.)
Why indices matter to you
- They are a benchmark — you can compare your own returns against the index to see if you actually beat the market.
- They reveal overall sentiment at a glance.
- They are the foundation of index funds and ETFs, the easiest way for a beginner to own a slice of the whole market at once — which is exactly the next lesson.
This content is for educational and informational purposes only and is not investment, financial, tax or legal advice. Trading and investing carry risk, including the possible loss of capital. Any performance shown by third-party tools is hypothetical and not a promise of future results. Do your own research and consider professional advice before making any decision.