What is an Index Fund? (Finance)
July 15, 2024
An index fund is a type of mutual fund or exchange-traded fund (ETF) that is linked to a benchmark index, like the S&P 500.
When money is put into an index fund, it is used to invest in all the companies that make up the chosen index, which creates a more diverse portfolio than buying individual stocks.
S&P 500 Example: The S&P 500 index tracks the performance of the top 500 largest companies in the U.S. This means that your investment is diversified across a wide range of the top 500 companies.