Broad-Based Index

Broad-Based Index

An index designed to reflect the movement of the entire market. The smallest broad-based index is the Dow Jones Industrial Average with 30 industrial stocks, and the largest is the Russell 300 Index. Other examples include the S&P 500, Wilshire 5000 Total Market Index, AMEX Major Market Index, and the Value Line Composite Index.

Notes:

Investors who want the maximum benefit of diversification can invest in securities that have as their underlying tracking instrument an index or other financial product made up of several, well-diversified stocks. Securities that are based on broad-based indices allow investors to effectively own the same basket of stocks that are contained in a major index while committing a small amount of financial resources.

See also: Diamonds, Dow Jones Industrial Average - DJIA, Index, Index Fund, iShares, Russell 2000 Index, Standard and Poor's 500 Index - S&P 500, Spiders - SPDRs, Value Line Index, Wilshire 5000 Total Market Index - TMWX