What are the different types of indexes?

These could be constructed as a broad-based index that captures the entire market, such as the Standard & Poor's 500 Index or Dow Jones Industrial Average (DJIA), or more specialized, such as indexes that track a particular industry or segment, such as the Russell 2000 Index, which tracks only small-cap stocks.

What are indexes used for?

Investors also use indexes as a basis for portfolio or passive index investing. In the U.S. such representative indexes include the large-cap S&P 500 and the technology-heavy Nasdaq 100. An index measures the performance of a basket of securities intended to replicate a certain area of the market, such as the Standard & Poor's 500.

What are 'true' indexes?

I would argue that "true" indexes are those that most broadly measure a segment of the market. That implies full market-cap coverage and market-cap-weighting. Anything different begins to inch across the passive-to-active spectrum in the direction of active management.