Understanding Indices

Source: BURSA MALAYSIA | Published: May 2020

A stock market index is a single number calculated from the prices of many different stocks. Index is also called indices when you talk about more than one of them. Indices are used as benchmarks of stock performance for portfolios like mutual funds.

Some investment funds (index funds) manage their portfolio so that their performance mirrors (tracking) the performance of a stock market index or a sector of the stock market.

For example, the Consumer Price Index (CPI) for January to December 2019 increased by 3.0% to 109.1 compared with that of 105.9 in the same period the previous year. This information indicates that the retail prices paid by households for goods and services increased in that period. CPI is designed to provide a broad measure of changes in retail prices.

An index is a tool which enables investors to measure the performance of a group of stocks from a defined market. It can form a benchmark for active or passively managed portfolios covering th


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