In a Nutshell: An index is a collection of asset-class specific securities collected under a single umbrella or “index” to represent the performance of a particular market or sub-set of a market. Indexes themselves are not bought or sold, but there are ETF’s you can invest in which mirror index movements.

Definition: An index is essentially a bundle of securities (stocks or bonds) designed to represent the performance of a specific asset class, security market, or segment of a market (i.e. the small cap stock index is known as the Russell 2000). Indexes are typically created as bundles of individual securities seen as constituent securities of a given index.
More examples of indexes are listed below. Investors who wish to “hug” or “mirror” the performance of an index can invest in ETF’s that essentially trade up or down in concert with the ups and downs of the indexes. The following are the major US Indexes as well as the ETF’s which mirror them:
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• The SP 500 Index. This index comprises the 500 largest US companies/stocks and its performance serves as broad market indicator. The ETF which mirrors this index is SPY.
• NASDAQ 100 Index. This index is comprised of the 100 largest companies on the NASDAQ exchange and is generally considered a proxy of the technology sector. The ETF that mirrors this index is QQQ.
• Russell 2000 Index. This index is a basket of all US small-cap (i.e. small-sized) companies; the ETF which mirrors its performance is IWM.
• SP Midcap Index. This index tracks the basket of all US mid-cap (i.e medium size companies); the ETF which tracks its performance is MD4.
• The Russell 3000 Index. This broad index includes 3000 US stocks and represents nearly all US stocks, minus the very smallest companies. The ETF for this index is IWV.
• The Wilshire 5000 Index. This is the broadest index and essentially is comprised of every US stock on the listed market/exchanges. There is no real ETF equivalent for this index, primarily because so many of the underlying companies have low to zero liquidity.