Index Fund
Quick definition: An index fund is a fund that simply copies a market index, such as the S&P 500, instead of trying to pick winning investments.
In plain English
An index fund holds the same investments as an index, in the same proportions. There is no manager picking stocks, which keeps costs low. An index fund can be a mutual fund or an ETF.
Example
An S&P 500 index fund holds the roughly 500 companies of the index. If the index rises 10%, the fund aims to rise about 10% before fees.
Why it matters
Low costs and broad diversification are the main attractions. Dividends from the companies in the index are collected by the fund and paid to you.
Common mistakes
- Thinking all index funds are the same. They follow different indexes with different risks.
- Ignoring the expense ratio.
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purposes only. The calculations, examples, and projections are simplified
estimates and may not reflect real-world investment results.
Nothing on this website should be interpreted as financial, investment,
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decisions and any outcomes resulting from them.
Past performance and projected returns do not guarantee future results.
Always conduct your own research and consult a qualified financial advisor
before making investment decisions.