Browse Definitions :
Definition

index fund

Contributor(s): Matthew Haughn

An index fund is a type of mutual fund collection that follows the trend of a given security or market index, which represents a number of sectors of a market and offers comprehensive exposure to several markets.

Index funds increase and decrease in value relative to the market index that they track. Examples of market indexes include the Russell 2000, Dow Jones Industrial Average and the Standard and Poor 500 (S&P 500). These indexes are traded on all major exchanges and make up 20% of equity of mutual fund assets in the United States as of 2014.

Index funds were offered to the public after numerous financial publications noted that the performance of mutual funds, which consist of chosen stocks, failed to meet market averages. Prior to index funds, investors in mutual funds had no option to simply invest in the average of a market. Because performance is based off average market trends, index funds are seen as a type of passive investing. The diversity of funds calls for less active management, which causes a decrease in investor expenses as less is spent on fund managers, analysts and researchers to help in the stock selection process. Simplicity and lower cost are seen as significant advantages, especially for those new to investing.

The first index fund was made available by the mutual fund company The Vanguard Group in 1974, founded by John Bogle.

This was last updated in November 2018

Continue Reading About index fund

Start the conversation

Send me notifications when other members comment.

Please create a username to comment.

-ADS BY GOOGLE

File Extensions and File Formats

SearchCompliance

  • compliance audit

    A compliance audit is a comprehensive review of an organization's adherence to regulatory guidelines.

  • regulatory compliance

    Regulatory compliance is an organization's adherence to laws, regulations, guidelines and specifications relevant to its business...

  • Whistleblower Protection Act

    The Whistleblower Protection Act of 1989 is a law that protects federal government employees in the United States from ...

SearchSecurity

  • brute force attack

    Brute force (also known as brute force cracking) is a trial and error method used by application programs to decode encrypted ...

  • spyware

    Spyware is software that is installed on a computing device without the user's knowledge. Spyware can be difficult to detect; ...

  • ATM black box attack

    An ATM black box attack, also referred to as jackpotting, is a type of banking-system crime in which the perpetrators bore holes ...

SearchHealthIT

SearchDisasterRecovery

  • business continuity and disaster recovery (BCDR)

    Business continuity and disaster recovery (BCDR) are closely related practices that describe an organization's preparation for ...

  • warm site

    A warm site is a type of facility an organization uses to recover its technology infrastructure when its primary data center goes...

  • disaster recovery (DR) test

    A disaster recovery test (DR test) is the examination of each step in a disaster recovery plan as outlined in an organization's ...

SearchStorage

  • disk array

    A disk array, also called a storage array, is a data storage system used for block-based storage, file-based storage or object ...

  • enterprise storage

    Enterprise storage is a centralized repository for business information that provides common data management, protection and data...

  • optical storage

    Optical storage is any storage type in which data is written and read with a laser. Typically, data is written to optical media, ...

Close