What Is an Index?

Or, why your pension, portfolio, and that friend who always checks the FTSE before checking the weather all care deeply about the FTSE 100.

You’ve probably heard the word index thrown around in financial circles – often with great seriousness and a furrowed brow. “The index is down today,” someone might say, as though that explains why your portfolio’s looking sadder than a limp sandwich at a picnic.

But what exactly is an index in financial terms? And why do we care?