When you hear “the stock market was down 125 points today,” it makes the market seem like a single entity, as if all stocks fell together and a loss of 125 points resulted. In reality, stocks rarely move together like that. On a “down” day, when thousands of stocks are declining in value, thousands of others may be increasing in value. Any report about how “the market” did is based on a measurement — or index — of a particular group of stocks.

Some indexes measure the performance of small-company stocks. Others focus only on large-company stocks. Still others are aimed at measuring the overall market.

When investing via “index funds” — such funds are commonly available in employer-sponsored retirement plans — it’s important to know which indexes the funds are seeking to imitate. You can find out by looking at a fund’s prospectus (or reviewing the summary information for the fund provided by your 401(k)-plan administrator). The table below lists a few of the many funds designed to mimic certain indexes.

Even if you’re not using index funds, indexes can serve as benchmarks against which to measure the performance of your portfolio. Just be sure to compare apples to apples. Knowing how the largest stocks performed is of little value if you own a fund that invests primarily in small companies. To get meaningful information that relates to your situation, you have to compare to the correct index.

Although different indexes sometimes move in tandem, they can diverge too — sometimes widely. As an example, consider the year-to-date performance of the S&P 500 index. Through June 24, that index was down –17.9%. In contrast, the Nasdaq Composite had declined –25.8%. That’s a significant difference.

Here is an overview of the most popular stock market indexes.

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