» Dictionary of Mutual Fund Terms » Index Fund

Index Fund

Index Fund: The index fund is a type of a mutual fund that mimics the movement of a stock market fund.

Some of the indexes whose performance mutual funds attempt to mimic are Russell 2000, Wilshire 5000, NASDAQ 100, MCSI-EAFE and others. Generally, index funds attempt at mimicking the percentages of the S&P 500 index. This is done through the purchase of all 500 stocks that are in the S&P 500.

You can benefit from index funds in several ways, some of which are tax and performance efficiency as well as low fees. These advantages come from the fact that index funds represent passive investments and as a result outperform many of the actively managed funds.

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