Indices represent a group of stocks from a particular exchange or industry. A typical index is a statistical weighted average metric that tracks the performance of a basket of stocks.
Investors use indices to assess the overall performance of an exchange or a particular industry. Because they are composed of multiple stocks, indices have smooth price action and are less vulnerable to sudden market shocks because no single stock can significantly impact the overall price.
Some of the most popular global indices include the S&P 500, Dow Jones and the Nasdaq 100.