Index fund

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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.

Index Fund

A mutual fund that is not actively-managed and simply tracks a benchmark index. That is, the investment company managing the mutual fund places the liquidity in securities represented in a certain index. Thus, when that index increases in price, so does the mutual fund, and vice versa. An exchange-traded fund is a prime example of an index fund. Many popular tracker funds track the S&P 500 and other S&P indices. An index fund is less commonly called an index fund. See also: Closet index fund, SPDR.

index fund

A mutual fund that keeps a portfolio of securities designed to match the performance of the market as a whole. The market is represented by a market index such as the S&P 500. An index fund has low administrative expenses and appeals to investors who believe it is difficult or impossible for investment managers to beat the market. Also called market fund.

Index fund.

An index fund is designed to mirror the performance of a stock or bond index, such as Standard & Poor's 500 Index (S&P 500) or the Russell 2000 Index.

To achieve that goal, the fund purchases all the securities in the index, or a representative sample of them, and adds or sells investments only when the securities in the index change. Each index fund aims to keep pace with its underlying index, not outperform it.

This strategy can produce strong returns during a bull market, when the index reflects increasing prices. But it may produce disappointing returns during economic downturns, when an actively managed fund might take advantage of investment opportunities if they arise to outperform the index.

Because the typical index fund's portfolio is not actively managed, most index funds have lower-than-average management costs and smaller expense ratios. However, not all index funds tracking the same index provide the same level of performance, in large part because of different fee structures.

References in periodicals archive ?
What was once a simple argument to understand -- market-cap-weighted index investing vs.
New Frontiers in Index Investing," Journal of Indexes 58(1/2): 32-37.
The RAFI approach aviods this problem, while retaining the benefits of index investing: full market representation, diversification, large capacity, high liquidity and low turnover.
Vanguard, the champion of index investing, has its own line of funds, VIPERs, for Vanguard Index Participating Equity Receipts.
For those unfamiliar with the term, index investing is a technique that involves holding a basket of securities, identical in name and number, to an underlying benchmark or index.
The new firm, which will begin operations in late September, will specialize in passive investments, or index investing, in which investments are made in securities that reflect stocks and other global indexes, Chuo Mitsui said.
However, this is a macro issue unrelated to index investing.
Public fund investors--particularly pension fund managers--may be interested to learn that index investing is about to change in Britain.
Because the data from the equity market support the merits of index investing, those exposed to and able to process this data are more likely to understand the merits of index funds.
All-Equity portfolios will be managed algorithmically with a dynamic asset allocation driven by value and momentum, in line with the Active Index Investing approach Elm has applied since 2012.
"Our research shows that the shift to index investing hasn't led to an abdication of stewardship responsibilities," explained Hortense Bioy, director of passive funds research at Morningstar, in a summary of the study findings.