index
Index: a single number that tracks how a whole group of shares is doing, so you can tell the mood of the market without checking every company one by one.
In plain English
Adaeze runs a small shop in Onitsha and also has a modest portfolio she manages from her phone. Every morning before she opens her shop, she checks one number on an app: the NGX All Share Index. She does not look at all 150 or so companies listed on the Nigerian Exchange. She just looks at that one figure, and it tells her, in seconds, whether the market is generally smiling or frowning that day.
That number is an index. It is a way of bundling many shares together and giving the whole group a single score, so you can track the mood of a market without checking every company one by one. When people say 'the market is up' or 'the market fell today', they are usually quoting an index, not every single stock.
The NGX All Share Index covers shares on the Nigerian Exchange. In the United Kingdom, the FTSE 100 does a similar job, tracking the 100 biggest companies listed in London. In the United States, people quote the S&P 500 the same way. None of these indices is a company you can walk into. It is a scorecard, built from real companies, updated constantly as prices move.
Indices matter beyond headlines too. Many funds, including some that Nigerians in London or Lagos invest in monthly, are built to simply copy an index rather than pick individual winners. These are called index funds, and they exist because trying to beat the market every year is hard, even for professionals, so copying it cheaply and patiently often works out better over time.
So when someone abroad wiring money home mentions that 'the Lagos market had a good week', they are talking about the index. It is a small phrase carrying a big, useful summary.
Say the NGX All Share Index opens the week at 98,000 points and closes on Friday at 99,500 points. That rise of about 1.5 percent tells Adaeze that, on average, share prices across the exchange nudged upward that week, even without her checking each of the 150 companies individually.
Questions people ask
Can I invest directly in an index?
Not in the index itself, since it is just a number, but you can invest in an index fund or ETF built to copy it, which is how most everyday investors get index exposure.
Why do different indices show different numbers for the same market?
Each index chooses its own companies and its own way of weighting them, so the NGX All Share Index, the NGX 30, and others can move slightly differently even when tracking the same broad market.
Is a rising index always good news for my personal portfolio?
Not necessarily, since an index is an average and your own shares could be doing better or worse than the overall trend, so it is a guide to the market's mood, not a report card on your specific holdings.
Last reviewed