A type of mutual fund or ETF designed to track the performance of a specific market index.
An index fund is a type of mutual fund or exchange-traded fund (ETF) with a portfolio constructed to match or track the components of a financial market index, such as the S&P 500. Index funds provide broad market exposure, low operating expenses, and low portfolio turnover. They follow a passive investment strategy, meaning fund managers don't actively pick securities. This approach has historically outperformed most actively managed funds over the long term.
An S&P 500 index fund holds stocks of all 500 companies in the S&P 500 index in proportion to their market capitalization. If you invest $10,000, you're effectively owning a tiny piece of all 500 companies.