Investing
Index fund
A fund that holds every stock in a market index instead of trying to beat it.
Also known as: index tracker, passive fund
Updated June 2026
An index fund buys all (or a representative sample) of the securities in a market index — such as the S&P 500 — so its return tracks that index rather than relying on a manager to pick winners.
Why people use them
- Low cost. No expensive research team, so fees are a fraction of active funds.
- Diversification. One purchase spreads risk across hundreds of companies.
- Consistency. Most active managers fail to beat their benchmark over a decade.
Index fund vs ETF
An index fund and an ETF can track the same index. The difference is mechanics: ETFs trade like a stock throughout the day; traditional index funds price once daily.