What is an index fund?
This is a type of mutual fund with a portfolio designed to track a specific basket of underlying investments. This could include a market index, such as Standard & Poor's 500 or the Dow Jones Industrial Average.
Where have you heard about index funds?
They're a popular way to invest in the stock market and diversify a portfolio. They're a form of passive investing so investors don't have to spend a lot of time analysing various stocks or portfolios.
What you need to know about index funds.
They're sometimes known as tracker funds. An index fund holds securities in the same proportion as they appear in the index it tracks. So when the index increases in value, the the fund's shares increase as well, and vice versa. When you buy a share in an index fund, you're buying a share of a portfolio containing the securities in the underlying index. They're available for almost any index - while the most popular track major indexes, there are others tracking smaller companies, foreign stocks, and other indexes.
Find out more about index funds.
An index mutual fund is said to provide broad market exposure. Find out more with our guide.