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Indexes are critically important in today's investment markets but an index is never just an index. Explore how good indexes are created, what makes them work and why they are an essential tool to help investors.

Since the 1970s, investors have turned to indexing as a performance benchmark and a tool to support investment strategies, pouring more than $1.3 trillion in assets into index-backed exchange traded funds, mutual funds and other products. But what is an index? What does it do exactly? How is it decided which securities are included? And why might indexing as part of an investment strategy offer such compelling long-term results?

In the links above, we look under the hood of indexing to explain how and why indexes work, why it is important to understand an index before choosing a related investment vehicle, and how indexes and index providers differ from one another. The topics we cover include:

  •          What is an index?
  •          Can you invest in an index?
  •          Why do passive, index-based strategies outperform active management?
  •          How are index securities decided?
  •          How are indexes weighted?
  •          What does an index value mean?
  •          How does an index become an ETF?
  •          How should you evaluate an index provider?

 

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