What is an index fund?

An index fund is type of investment fund, generally a mutual fund, that attempts to duplicate or match the movement of an index of stock within a financial market. An index fund has low portfolio turnover, offers a wide range of exposure within the market and has low operating expenses.

An index fund is cheaper than actively managed funds and requires less work to maintain. Index funds offer diversity to investors and provide an effective way for investors to own exposure within a specific market. An index fund owns all investments within the index, and the lower costs help contribute to success of the investor.