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Index Fund

Definition: A fund that simply tracks a market index instead of trying to beat it.

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An index fund is a fund that holds the components of a market index in order to match its performance, rather than employing managers who try to beat it.

Because there is no research team to pay for, running costs are typically a small fraction of an actively managed fund's. That cost difference compounds: over decades, fees deducted every year make a substantial dent in the final amount. Index funds are the conventional starting point for new investors precisely because they require no skill at picking winners — you accept the market's return rather than betting on beating it.