There are thousands of publicly traded companies in the stock market. The market is so large that is impossible to say with any reliability what is happening to the entire market. To do so would be like trying to say what the mood of ALL the people in the United States is on any given day. A stock index is a statistical sample of the market. When people talk about the stock market, they are usually talking about an index.

The most widely-known stock index is the Dow Jones Industrial Average (DJIA). This is the index most commonly referred to when people talk about the condition of the "market." This index contains 30 blue-chip stocks from the New York Stock Exchange. Blue chips are companies with a long history of growth and profitability . Most of the stocks on the Dow are industrials, meaning they are in the business of manufacturing products. There is some controversy as to whether the Dow can be an accurate statistical sample given that it only consists of 30 stocks from one industry; nevertheless, it continues to be the most popular indicator in existence.

The Standard and Poor's 500 index tracks 500 stocks from industrial, transportation, utility and financial companies. Many index funds are based on the Standard and Poor's 500. Index funds allow investors to place their money in all the stocks from one index, such as the Standard and Poor's 500. The Standard and Poor's 500 has grown at a rate of 13.6% annually over the last 50 years. Someone who invested $1,000 50 years ago would now have more than $578,000! This is why index funds are so popular with investors.