What a stock index is and what asset types exist

An index is a basket of shares — slices of ownership in a company — chosen under published rules, boiled down to one number to measure how a market is moving.

It isn't a product you invest in directly: that's what the funds — where many people pool their money and a manager decides what to buy — and the ETFs (exchange-traded funds) tracking it are for.

Its composition changes, and a committee changes it.

What an index is and who decides what's in it

Every index has published rules and a committee of people who apply them. Not just anyone gets in. First come objective criteria: the company's size and its liquidity, meaning how easily you can buy and sell its shares. Then a human decides who fills each free slot.

What an index is for, which is three separate jobs

Measuring. It boils down into one number how a set of companies is moving. When the news says "the IBEX rose 1.2%," it's using the index as a thermometer.

Comparing. It's the bar everything else gets measured against. In the opening session we saw that 98% of euro-denominated global equity funds failed to beat their reference over ten years.

Equity means shares. Beating their reference means earning more than the list of companies that fund is compared against.

The figure comes from the SPIVA Europe scorecard by S&P Dow Jones Indices, with data as of June 30, 2025. That reference was an index. Without it, there'd be no way to tell whether a manager added anything or simply rode the market.

Investing, indirectly. You can't buy an index, but you can buy a fund or ETF that tracks one. That use is what turned indices into something that moves real money, not just information.

The S&P 500 asks four things of a company. One, to be American. Two, to clear a minimum market capitalisation: S&P Dow Jones Indices reviews that floor quarterly, and since July 2025 it has stood at $22.7 billion. Market capitalisation is the share price multiplied by the number of shares in existence.

Three, to have enough public float genuinely available to trade. And four, to post positive accounting profit both in its most recent quarter and across the sum of the last four.

Meeting the requirements doesn't open the door: it only makes you eligible.

A real change, with names and a date

In April 2026, S&P Dow Jones Indices announced a substitution.

Hologic (HOLX) left, a healthcare company, because private equity firms bought it: funds that buy whole companies and take them off the market. Once it stops being publicly listed, it's automatically out of an index of listed companies.

Casey's General Stores (CASY) entered, a convenience store operator, promoted from the S&P MidCap 400 — the mid-cap index — after posting a 34.43% gain on the year, according to Bloomberg Línea, a financial news outlet.

Someone has to leave for someone to enter, because the index is called "500" and holds exactly 500.

Exits are almost never a punishment: most commonly the company was bought, merged, or stopped being listed.

How the S&P 500, Nasdaq-100, and IBEX 35 are weighted

All three weight their companies by size, not equally: the more a company is worth, the more it drives the final number. So when you read "the index rose 1%," a handful of giant companies may have risen a lot while the rest barely moved.

Index	What it holds	How it weights	Who reviews, and when
S&P 500	500 large US companies	Float-adjusted market cap	S&P Dow Jones Indices committee, as needed
Nasdaq-100	100 largest non-financials primarily listed on Nasdaq	Modified market cap, with per-company caps	Nasdaq: annual reconstitution in December, weights in March, June and September
IBEX 35	35 most liquid stocks on the Spanish exchange	Float-adjusted market cap, 20% cap per constituent	Sociedad de Bolsas (BME group, Bolsas y Mercados Españoles) Technical Advisory Committee: redefinitions in June and December, monitoring in March and September

Float-adjusted market cap is what the public float is worth: the shares genuinely available to buy and sell.

The caps exist for a reason: without them, one very large company could end up representing half the index, and that index would stop measuring a market and start measuring a company.

The IBEX 35 caps any single stock at 20% precisely for that.

The body that sets the cap is Sociedad de Bolsas, the company that runs the Spanish exchange.

The practical consequence of weighting by size. An index built this way doesn't tell you how the average company in that market is doing: it tells you how the biggest ones are doing, with the rest as background. Those are two different questions, and confusing them leads to wrong conclusions about "how the market is going."

There's another way to weight, and it makes the bias visible

There's an alternative that exposes that bias: the equal-weighted index, where all 500 companies carry the same weight, 0.2% each, regardless of size.

The same market measured both ways can produce very different results, and that difference is information. If the standard index rises considerably more than its equal-weighted version, the rally is being driven by a few large companies. If they rise similarly, the gains are spread out.

In the first half of 2026, 46.3% of S&P 500 constituents outperformed the index itself, according to First Trust Advisors, a US fund manager, with data from Capital IQ, a financial database.

Between 2023 and 2025 the figure never passed 30.5%.

The rally stopped depending on a handful of stocks and started spreading. The headline index number alone doesn't tell you that.

Why joining or leaving an index moves the price

Because thousands of funds are obliged to track that index, meaning to hold the same companies it does. When a company enters, those funds have to buy its shares, no argument, with no opinion on whether it's expensive or cheap. When it leaves, they have to sell just the same, and before the date the committee sets.

An index fund doesn't choose: its contract with investors says it will hold exactly what the index holds, in the same proportions.

April 2026 again: the moment it was announced that Casey's was joining the S&P 500, every fund tracking that index knew it had to buy Casey's shares before the effective date.

Why this matters even if you never buy an index. It's the cleanest example that a stock's price can move for reasons that have nothing to do with the business. Casey's wasn't selling more fuel on announcement day than the day before. What changed was who was obliged to buy it.

Price responds to flows — money going in and out because someone is obliged to buy or sell — and to expectations, not only to results.

Telling apart a move with a business cause from one with a technical cause is among the things that saves the most grief.

What separates the six asset types

Stock, bond, fund, ETF, derivative, and cryptocurrency aren't variants of the same product. Each one hands out three things differently: who owns what, who carries the risk, and which law protects you. And none of that shows on screen: your app lists them one under another, identical.

Type	What it actually is	Defining trait
Stock	Ownership of part of the company	No ceiling on gains, paid last if it goes under
Bond	A loan to a company or a government	Interest agreed in advance, paid before shareholders
Mutual fund	A basket of many assets in one product	Bought and sold once a day, at a price set at the close
ETF	A basket of many assets, exchange-listed	Bought and sold any time during the session, like a stock
Derivative	A contract whose value depends on another asset	You own nothing: you hold a contract
Cryptocurrency	A digital asset with its own legal framework	Governed by MiCA (the EU markets in crypto-assets regulation), not by MiFID II (the EU markets in financial instruments directive) like the rest

The two distinctions people confuse most

Funds and ETFs do the same job, but you don't buy them the same way. Both pool many assets so you don't have to buy a hundred individual stocks.

An ETF is exchange-listed, so you buy and sell it any time during the session at a price moving in real time. A traditional fund is bought and sold once a day, at a single price calculated at the market close.

Crypto doesn't live under the same legal umbrella. In the European Union, stocks, funds, and derivatives are governed by MiFID II, the rule that shapes investor protection.

Crypto has its own, much more recent regulation: MiCA, applicable since 30 December 2024. Platforms already operating before then have no leeway left: their grace period ended on 1 July 2026.

Those are two separate regulatory worlds, and it changes what protections you have in each case.

The bond, which is the opposite of a share

With a bond you don't buy ownership: you lend money. You hand an amount to a company or a government, and in exchange they pay you an agreed interest — the coupon — and, at maturity, return what you lent.

The difference from a share is exactly the payment-queue order we saw in the chapter's first session, seen from the other side.

If the company earns triple what was expected, the shareholder benefits and the bondholder keeps collecting the same agreed coupon, not a euro more. If the company goes bankrupt, the bondholder stands further forward in the queue.

When a company asks you for money it can do it either way, and the choice matters to them: debt has to be repaid, shares don't.

It's the same dilemma we saw with Digi, a phone and internet operator that went public in 2026.

It carried €646.4 million of debt at the close of March 2026, according to its IPO prospectus, and chose to issue new shares rather than borrow more.

The derivative, where you own nothing

A derivative is a contract whose value depends on the price of something else. You don't buy the share: you buy the right, or the obligation, to buy or sell it under terms agreed in advance.

You can make or lose money on an asset's movement without ever having owned it. And since there's no ownership, there's no dividend and no vote either.

You already met one in the opening session: the CFD, or contract for difference.

On CFDs, 30,656 Spanish clients lost €142 million between January 2015 and September 2016, according to the CNMV (Spain's securities regulator) tally.

Derivatives have perfectly sensible uses, and hedging against a risk is the main one. A Spanish company that will be paid in dollars in six months can lock in the exchange rate today with a contract, so it knows how many euros it ends up with.

They're also the category where individual investors lose the most money.

They get their own chapter at the end of the course, once there's enough grounding to cover them without oversimplifying.

And that creates a gap.

Your app presents them with the same design, the same buy button, and the same chart. Nothing in the interface warns you that one makes you an owner, another makes you a lender, another gives you a contract without ownership, and another falls under a different law.

Knowing which category you're stepping into is the first decision, and it gets made before you look at the price.

That's one of the reasons Volatly treats every asset according to what it is and how it actually behaves. Coca-Cola doesn't move like Tesla, and neither of them moves like a bond ETF: one rule applied to all three gets all three wrong.

What to remember

• An index is a basket with published rules and a committee that decides; getting in means meeting the criteria and there being a slot free.
• The big three weight by size, so "the index rose 1%" can mean a few enormous companies rose.
• Joining or leaving an index moves the price because it forces thousands of tracking funds to buy or sell, with no change to the business.
• Stock, bond, fund, ETF, derivative, and crypto distribute ownership, risk, and legal framework differently, even though your app shows them identically.

Milestone reached

That closes Chapter 1. You can read the front page of the financial press and understand what it's talking about: what a share is and what you actually buy with it, how an order gets matched, who's on the other side, what an index measures, and what separates each asset type.

Chapter 2 steps away from the market for a moment and looks inward: your money, your time horizon, and how much loss you can stomach. It starts with what to have sorted before investing your first euro.

Related: how to choose a broker and what happens if it fails · what each indicator measures · what actually happens when you hit buy