What Is a Stock Index

A stock index, in five lines

A stock index is a basket of companies' share prices combined by a rule into one number. The number is in points rather than dollars: the Dow stood at 53,528.12 and the Nasdaq 100 at 29,187.55 at 10:00 on Tuesday 25 August 2026 in this library's bars. The rule is the index: most weight each company by its size, and the Dow, unusually, weights by share price. The index itself cannot be bought; what is traded is a contract that follows the number, a CFD, which is a contract on the price difference, a future or an ETF. That day the Dow ran 371.13 points from its low to its high, which at a broker paying one dollar a point per lot is 371.13 dollars.

A crate of fruit with one price

Picture a crate of fruit with one price on the side, thirty apples in it, priced as a crate rather than apple by apple. When most apples go up the crate goes up, and one bruised apple barely shows. A stock index is the price on the side of the crate, one number for the whole box, the Dow's thirty companies here at 53,528.12 points on 25 August 2026. You cannot buy the crate at the market; what you can buy is a ticket whose value follows the crate's price, and the ticket is what a platform lists.

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