An index stock refers to a company that is included in a stock market index, which is essentially a measurement of the value of a section of the stock market. These indices are designed to represent the overall performance of a particular market or a specific segment within it. They provide investors with a benchmark to compare the return on their investments and help in making informed decisions. To understand the concept of an index stock, it is essential to delve into the workings of stock market indices. A stock market index is a hypothetical portfolio of securities representing a particular market or a segment of it. These indices are calculated using a specific formula that considers the prices of the constituent stocks, their market capitalization, or a combination of both. Some popular stock market indices include the Dow Jones Industrial Average (DJIA), the S&P 500, and the Nasdaq Composite. Now, let's discuss how a company becomes an index stock. Companies are selecte...