An index fund is a type of mutual fund or exchange-traded fund (ETF) designed to track the performance of a specific financial market index, such as the S&P 500 or the Dow Jones Industrial Average.
Index funds are passively managed, which means that they aim to replicate the performance of the underlying index, rather than trying to outperform it. This is achieved by holding a portfolio of securities that closely matches the composition of the index, in terms of the number and weight of stocks in the index.
The objective of an index fund is to provide investors with broad exposure to a particular market or segment of the market, at a low cost and with minimal risk. Since the fund is passively managed, it typically has lower fees and expenses than actively-managed mutual funds or ETFs, which can result in higher returns for investors over the long term.
Index funds are considered to be a popular and effective investment option for investors who are looking for a simple, low-cost, and diversified way to invest in the stock market. They are also considered to be a good choice for those who prefer a passive investment approach and do not want to spend time analyzing individual stocks or picking individual securities.
