Index Fund
A type of mutual fund with a portfolio constructed to match or track the components of a market index such as the S&P 500 Index. An index mutual fund is said to provide broad market exposure, low operating expenses and low portfolio turnover. Investopedia Says:
"Indexing" is a passive form of fund management that has been successful in outperforming most actively managed mutual funds. While the most popular index funds track the S&P 500, a number of other indexes, including the Russell 2000 (small companies), the DJ Wilshire 5000 (total stock market), the MSCI EAFE (foreign stocks in Europe, Australasia, Far East) and the Lehman Brothers Aggregate Bond Index (total bond market) are widely used for index funds.
Investing in an index fund is a form of passive investing. The primary advantage to such a strategy is the lower management expense ratio on an index fund. Also, a majority of mutual funds fail to beat broad indexes such as the S&P 500. Related Terms:
Enhanced Index Fund - EIF
Exchange-Traded Fund - ETF
Expense Ratio
Index Hugger
iShares
Mutual Fund
Passive Investing
Passive Management
Standard & Poor's 500 Index - S&P 500
Tracker Fund |