Index Fund
A fund that passively tracks a market index, offering broad diversification at very low cost.
What does index fund mean?
Rather than trying to beat the market, an index fund mirrors it — holding all (or a representative sample) of the securities in an index like the S&P 500. Their low fees have helped them outperform most active funds over the long run.
Put it to use
Compare Investment Fees Even a small difference in the fees you pay on your investments can add up over time. Use this calculator to see how different fees impact your investment strategy! Investment Returns There is more to investing than knowing your annual rate of return. Use this calculator to help you see how inflation, taxes and your time horizon can impact your bottom line.
Related terms
Index Fund — frequently asked
What is the difference between an index fund and a mutual fund?
An index fund is a type of mutual fund (or ETF) that passively tracks a benchmark like the S&P 500. Actively managed mutual funds instead pay managers to pick holdings, which usually means higher fees and, often, lower net returns.
Why are index funds so popular?
They offer instant diversification, very low fees, and returns that match the market — which most active funds fail to beat over the long run. Lower costs compound into meaningfully larger balances over decades.