The ASX 200 does not represent the entire stock market, but it comes close. This is because the index accounts for approximately 80% of the total value of the Australian share market. As a result, it is frequently used as an indicator of the overall health of the Australian economy.

The ASX 200 index can also be used to compare the performance of individual stocks and even entire portfolios. Some funds may be required to replicate or outperform the returns of an index.

Investing in the index can also help with portfolio diversification because it includes a diverse basket of liquid, regularly traded stocks that represent major Australian listed companies.

The ASX 200, or the Australian Securities Exchange 200, is a stock market index that tracks the 200 largest companies listed on the Australian Securities Exchange. It is considered a key benchmark for the Australian economy, reflecting the performance of major sectors, including finance, materials, healthcare, and energy. Investors and analysts use the ASX 200 to gauge the overall health of the Australian stock market and economy. The index provides valuable insights into market trends and investor sentiment, helping investors make informed decisions. Moreover, it serves as a reference for investment funds and exchange-traded funds (ETFs) that track its performance, making it a crucial tool for both local and international investors looking to gain exposure to Australia's top companies.