What is a stock index and how do I invest in one?

So tell me, what are indices?

Indices were originally invented as a measure of the stock market’s health. It would be difficult to measure the state of the entire market based on a single stock – while one stock is down, another may be up, and so no one stock can ever reflect the big picture. But if you took a selection of stocks, especially if those were the stocks of the biggest companies in a certain economy or business sector (e.g. automotive, banking), you could get a glimpse into where the market is headed as a whole.

This is where stock indices come in. An index is a basically a number that reflects the added up changes of each stock within a certain group of stocks, which are selected to represent a portion of the overall market.