Index & Benchmark
An index is a statistical measure of a section of the financial market. It tracks the performance of a group of assets and serves as a benchmark against which investors measure their own portfolio performance.
🔑 Key Characteristics
| Property | Detail |
|---|---|
| Tradeable? | Not directly — but ETFs and futures track indexes |
| Examples | S&P 500, MSCI World, FTSE 100, DAX, Nikkei 225 |
| Use in LibreFolio | Read-only benchmark reference for Asset Comparison signal; transactions are not allowed |
| Pricing | Computed from constituent weights, not traded on an exchange |
📊 How Indexes Are Constructed
📈 Weighting Methods
| Method | Formula | Example |
|---|---|---|
| Market-cap weighted | Weight ∝ company market cap | S&P 500, MSCI World |
| Price weighted | Weight ∝ share price | Dow Jones, Nikkei 225 |
| Equal weighted | All constituents have same weight | S&P 500 Equal Weight |
🔄 Rebalancing
Indexes are periodically rebalanced — constituents are added, removed, or re-weighted. This typically happens quarterly. ETFs that track the index must adjust their holdings accordingly.
📐 Using Benchmarks in LibreFolio
LibreFolio offers two types of benchmarks:
📊 Real Benchmarks (Asset Comparison)
Compare your asset's chart against another real asset (e.g., compare your stock against the S&P 500 ETF). This uses the Asset Comparison signal overlay.
🎯 Synthetic Benchmarks
Mathematical reference curves that answer "what if my asset had grown at X% per year?":
- Linear Growth — Simple interest model
- Compound Growth — Compound interest model
- Sine Wave — Cyclic reference for seasonality
🔗 Related
- 📊 ETFs — Instruments that track indexes
- 🎯 Synthetic Benchmarks — Mathematical reference curves
- 📈 Returns & Growth Rates — Measuring performance vs benchmark