Glossary
Index Fund
Investing
An index fund is a fund that aims to replicate the composition and return of a market index rather than to beat it.
Because there is no active security selection, index funds run very low fees and very low turnover. They can be structured as ETFs or as traditional mutual funds; the underlying strategy is identical, the difference is how shares are bought and sold.
The trade-off is explicit: an index fund will never outperform its benchmark before costs, but it also avoids the manager risk and higher fees that cause most active funds to underperform over long horizons.