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 ?
The big investors, mainly pension funds, who use the tracker funds have woken up to a possible consequence of this, namely that with oil shares and bank shares now possibly at the end of a good upward run (based on the exceptional jump in the oil price and the unusually long period of stable interest rates) it may not be such a good idea to slavishly follow a share index heavily weighted towards these two sectors.
If this is the case a well-constructed fund that avoids heavy exposure to such funds may outperform a tracker fund.
You can put your money into what is known as a tracker fund.
HSBC Holdings (LSE: HSBA) is planning for EM, Bond and Index Tracker funds.
For a free guide explaining tracker funds, call 0800 544644.
The explanation is that while tracker funds aim to match the share index to which they are linked, they frequently fail to do so
That is because tracker funds are only interested in the big boys, so they pull their money out and that hits the share price.
Index or tracker funds shows how much of each share or instrument in the index to buy and when these instruments or share may be sold, reducing the human interference and judgment to a large degree.
HSBC Global Asset Management is considering the launch of its first emerging markets index tracker funds.
Annual management charges on tracker funds are typically 0.
But when prices are low, it's the best time to start drip-feeding money in to tracker funds.
For a free guide giving more information on tracker funds call 0800 544 644.