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An index fund is a type of mutual fund or ETF designed to match the performance of a specific market index, like the S&P 500.
In Depth
Instead of actively picking individual stocks, an index fund simply buys all the investments in a particular index in the same proportions. This approach aims to match the market's return rather than trying to beat it. Because they are passively managed, index funds typically have lower fees compared to actively managed funds, making them a popular choice for long-term investors.
Example
If you invest in an S&P 500 index fund, your investment will track the performance of the 500 largest U.S. companies.