An index gives you a snapshot of the overall performance of a particular market sector, for example all of the companies making software. It spares you the work of analysing how each company is doing individually. You’ve probably heard of the Dow Jones Industrial Average, which combines the trade results of the 30 most giant American companies (which change over time, but right now include Coca-Cola, Microsoft and Walt Disney). There are other indexes that look specifically at Canadian companies (S&P/TSX Composite Index), or companies around the world (Dow Jones Global Index).

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