Stock index

A stockTermStock×السهمA share of ownership in a company, bought and sold on a stock exchange, that may pay dividends and rise or fall in value.Open the term index is a weighted average of the prices of a selection of companies, designed to represent the performance of a market or a segment of it. The index starts at a base level on a chosen date, and moves up or down as the prices of its constituent stocks change. The Tadawul All Share Index, for example, includes the largest companies listed on the Saudi stock exchange and moves to reflect their collective price movement.

An index tells you whether the market as a whole is rising or falling, without needing to track hundreds of individual stocks. It serves as a benchmark: if you hold stocks or funds, you can compare your returns against the index to see whether you are keeping pace with the market or lagging behind. Many investment funds and exchange-traded funds (ETFs) are built to track an index, so their performance is directly tied to it. The index also shapes market sentiment: a falling index signals weakness and can trigger selling, while a rising one attracts new investment.

• An index is a snapshot of selected companies, not the entire market. The stocks included are chosen by the exchange or index provider, and that selection shapes what the index represents.
• Different indices measure different things. A broad market index includes large and mid-sized companies; a sector index tracks only banks or energy firms; a small-cap index focuses on smaller companies.
• The index value itself is arbitrary and carries no meaning. What matters is the direction and the percentage change. An index at 15,000 is not higher than one at 10,000 in any absolute sense; you compare them by looking at how much they have moved.
• Index composition changes over time. Companies are added and removed based on size, liquidityTermLiquidity×السيولةHow quickly and easily an asset can be converted to cash without losing value or paying a large fee.Open the term, or other criteria set by the index provider.