Broad-Based Index

A basket of securities intended to be representative of the overall market.

When trying to understand how the stock market works, Madison decided to focus on the Dow Jones Industrial Average, since it is the broad-based index with the fewest individual components. By doing so, she learned how defensive and cyclical stocks perform against each other, that financial companies are highly sensitive to interest rate changes, and that 3M is a publicly traded company (not the Dow’s number of Instagram subscribers, as she had originally thought).