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The first widely used index was the Dow Jones Industrial Average, which debuted with only 12 stocks in 1895. Standard & Poor's 500 Index was introduced in 1957, followed by the S&P 400 and S&P 600 indexes in 1991 and 1994 respectively. The Russell Indexes were launched in 1984 and now include 21 different indexes covering various equity market sectors--for example, large, mid and small capitalization stocks, and a variety of investment styles, such as growth and value. Lehman Brothers began publishing bond indexes in 1973.
Today there are indexes for real estate, international stocks and bonds, and myriad subsets.
With the introduction of ERISA in 1974 and broadened application of fiduciary standards, professionals and trustees alike increasingly turned to market indexes to compare the performance of total plan assets and individual managers to the performance of the financial markets over a given time. Indexes are selected to serve as benchmarks based upon the universe of securities a plan and/or manager allows for investment. Since there is no market …