Index Fund

An Index fund is a type of mutual fund or exchange-traded fund (ETF) that aims to replicate the performance of a specific Index, such as the S&P 500 or the Dow Jones Industrial Average. These funds are designed to provide broad market exposure, low Operating Expenses, and low portfolio turnover.

Index funds are typically passively managed, meaning they do not seek to outperform the Index but instead invest in the same Securities in the same proportions as the Index they track. This approach often results in lower fees compared to actively managed funds.

Examples of popular Index funds include:

• Vanguard 500 Index Fund (VFIAX) – tracks the S&P 500.
• Schwab U.S. Broad Market ETF (SCHB) – covers a broad range of U.S. Stocks.
• iShares Russell 2000 ETF (IWM) – targets small-cap Stocks in the Russell 2000 Index.

In cases where investors prefer diversification with lower costs, Index funds are often recommended as a viable investment strategy. For example, during periods of market growth, such as the Bull Market from 2009 to 2020, many investors benefited from the performance of Index funds that tracked major indices.