Index Fund

A type of mutual fund with a portfolio constructed to match or track the components of a market index, such as the Standard & Poor's 500 Index (S&P 500). An index mutual fund is said to provide broad market exposure, low operating expenses and low portfolio turnover.

"Indexing" is a passive form of fund management that has been successful in outperforming most actively managed mutual funds. While the most popular index funds track the S&P 500, a number of other indexes, including the Russell 2000 (small companies), the DJ Wilshire 5000 (total stock market), the MSCI EAFE (foreign stocks in Europe, Australasia, Far East) and the Lehman Aggregate Bond Index (total bond market) are widely used for index funds.

Investing in an index fund is a form of passive investing. The primary advantage to such a strategy is the lower management expense ratio on an index fund. Also, a majority of mutual funds fail to beat broad indexes, such as the S&P 500.


Investment dictionary. . 2012.

Look at other dictionaries:

  • index fund — see fund 2 Merriam Webster’s Dictionary of Law. Merriam Webster. 1996. index fund n. A mutual fun …   Law dictionary

  • index fund — n. a mutual fund that invests in the stocks used to compute a particular stock market index, thus tying its performance to that index …   English World dictionary

  • Index fund — An index fund or index tracker is a collective investment scheme (usually a mutual fund or exchange traded fund) that aims to replicate the movements of an index of a specific financial market, or a set of rules of ownership that are held… …   Wikipedia

  • index fund — Investment fund designed to match the returns on a stock market index. mutual fund whose portfolio matches that of a broad based index such as the S&P 500 and whose performance therefore mirrors the market as represented by that index. Bloomberg… …   Financial and business terms

  • index fund — noun 1. a mutual fund whose assets are stocks on a given list • Hypernyms: ↑mutual fund 2. a mutual fund that invests in the stocks that are the basis of a well known stock or bond index • Hypernyms: ↑mutual fund, ↑mutual fund company, ↑open end… …   Useful english dictionary

  • Index fund — Investment fund designed to match the returns on a stockmarket index. The New York Times Financial Glossary * * * index fund index fund ➔ fund1 * * * index fund UK US noun [C] (UK also tracker fund) FINANCE ► …   Financial and business terms

  • index fund — Fin a mutual fund composed of companies listed in an important stock market index in order to match the market’s overall performance. See also managed fund. Also known as index tracker, tracker fund …   The ultimate business dictionary

  • index fund — a fund, as a mutual fund or pension fund, with a portfolio that contains many of the securities listed in a major stock index in order to match the performance of the stock market generally. [1975 80] * * * …   Universalium

  • index fund — in′dex fund n. ste bus a mutual fund that invests in many of the securities listed in a major stock or bond index in order to match the performance of the market generally • Etymology: 1975–80 …   From formal English to slang

  • index fund — / ɪndeks fʌnd/ noun an investment fund consisting of shares in all the companies which are used to calculate a Stock Exchange index (NOTE: The plural is indexes or indices.) …   Dictionary of banking and finance

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