Basics of Indexing

What is an index?

An index is a collection of securities intended to represent a given market or market segment. Each holding within an index is known as a constituent.

It is important to bear in mind that an index is a theoretical concept. The performance of any ETF will be impacted by costs.

An index can be as broad as the US stock market (the S&P 500 has around 500 constituents) or as narrow as a single country or industry (the iShares FTSE/Xinhua China 25 fund has less than 30 constituents)

Indices can be designed to target different styles, sizes, sectors, target maturities or geographic locations.