What is indexing in economics?

Indexing is also used to refer to passively investing in market indexes to replicate broad market returns rather than actively selecting individual stocks. Indexing is used in the financial market as a statistical measure for tracking economic data. Indexes created by economists provide some of the market’s leading indicators for economic trends.

What is a financial index?

A financial index produces a numeric score based on inputs such as a variety of asset prices. It can be used to track the performance of a group of assets in a standardized way. Indexes typically measure the performance of a basket of securities intended to replicate a certain area of the market.

What is an index fund?

An index fund is a mutual fund or ETF that seeks to replicate the performance of an index, often by constructing its portfolio to mirror that of the index itself. Index investing is considered a passive strategy since it does not involve any stock picking or active management.