A stock market index measures the performance of a group of stocks. It helps investors track how a specific part of the market is doing—whether that’s the whole U.S. economy or a particular industry like technology.

Each index collects data from selected companies. By watching how their prices move, the index shows whether the market segment it tracks is rising or falling.

For example, if you want to know how tech companies are doing, you’d look at the Nasdaq index. If you want to track the biggest companies in the U.S., you’d check the S&P 500.

Indexes give investors a quick snapshot of market health and help them compare current trends with the past.

Some stock indexes are widely followed because they reflect the overall health of the U.S. economy or specific parts of it. Here are the most important ones:

Dow Jones Industrial Average (DJIA)

Tracks 30 of the largest, most established U.S. companies. It’s one of the oldest indexes and often seen as a snapshot of big business.

S&P 500

Includes 500 of the biggest U.S. companies. It’s considered the best overall indicator of the U.S. stock market’s performance.

Nasdaq Composite

Covers thousands of companies listed on the Nasdaq exchange, with a heavy focus on technology and innovation-driven businesses.

Russell 2000

Tracks 2,000 small-cap U.S. companies. It’s a popular measure of how smaller businesses are performing in the economy.

Each of these indexes serves a different purpose, helping investors follow trends in different parts of the market.

Beyond the major indexes, there are many specialized ones that track specific types of companies or investing styles. These offer more focused insights for investors.

Nasdaq-100

A narrower version of the Nasdaq Composite. It tracks the 100 largest non-financial companies on the Nasdaq—mainly tech giants. It’s ideal for following big-cap growth stocks.

Russell 2000

Though technically well known, it’s worth highlighting again. It tracks 2,000 small companies and is a key benchmark for small-cap performance. These stocks can be more volatile but also offer more growth potential.

Russell 3000

Covers the entire U.S. stock market by combining the Russell 2000 (small-cap) and Russell 1000 (large-cap). This index gives investors a broad view of the total market, from the smallest to the largest public companies.

These indexes are especially useful for investors who want exposure to specific company sizes or market segments without picking individual stocks.

Some indexes group stocks based on their investment style—such as value or growth—to help investors focus on specific strategies.

S&P 500 Value Index

Tracks companies in the S&P 500 that appear undervalued. These are usually mature, slower-growing businesses with low price-to-earnings ratios.
Examples: JPMorgan Chase, ExxonMobil, AT&T

S&P 500 Growth Index

Follows companies in the S&P 500 with strong sales growth and higher valuations. These are typically fast-growing firms investors expect to expand quickly.
Examples: Apple, Amazon, Meta (Facebook), Visa

These indexes let you choose between stable, established firms (value) or higher-risk, high-reward companies (growth), depending on your goals.

Market capitalization—or market cap—measures a company’s total value based on its stock price and number of shares. Some indexes focus on specific cap sizes to track different parts of the market.

S&P 500

Covers large-cap stocks, representing the biggest U.S. companies.

S&P MidCap 400

Tracks mid-sized companies. These businesses are often in a growth phase—less stable than large-caps but with more upside.

S&P SmallCap 600

Focuses on smaller companies. These tend to be more volatile but may offer higher returns over time.

Mid-cap and small-cap indexes give investors tools to explore beyond large corporations and into lesser-known, fast-growing companies.

To understand an index, don’t just look at how many points it moved—look at the percentage change. That shows how much the value shifted relative to its size.

Example:

Also, remember that no index tells the full story of the market. Each one tracks a specific group of stocks, so knowing what’s inside helps explain why it’s rising or falling.

Focus on the trend and context—not just the point movement—to get a true read of what’s happening in the market.

Stock market indexes serve several important roles for investors:

In short, indexes simplify the investing process, especially for beginners who want to invest broadly and steadily over time.

Not all stocks in an index are treated equally. How much influence each stock has depends on how the index is weighted. Here are the three main types:

1. Price-Weighted

Companies with higher stock prices carry more weight.
Example: In the Dow Jones, a $300 stock affects the index more than a $50 stock—even if the $50 company is larger.

2. Market-Cap Weighted

Stocks with a higher total market value (price × number of shares) have more impact.
Examples: The S&P 500 and Nasdaq Composite. Apple and Microsoft carry more weight than smaller companies.

3. Equal-Weighted

Every stock in the index is treated the same, no matter its price or size.

Some specialty indexes use other factors—like dividend payouts—to determine weight. But market-cap weighting is the most common because it’s simple and widely used in index funds.

long-term portfolio through index funds, indexes give you a clear, simple way to measure performance.

By understanding how indexes are built, what they track, and how they’re weighted, you’ll be better equipped to make smart investment decisions—without getting lost in the noise of daily stock movements. Whether you're a beginner or a seasoned investor, learning how to use indexes can help you invest with more confidence and clarity.