Yield Theory
Subscribe

Equities

Index Fund

An index fund is a fund designed to track the performance of a specific market index, such as the S&P 500, by holding the same securities in the same proportions.

Rather than trying to beat the market, an index fund simply aims to match it. By holding all or a representative sample of an index's components, it delivers the index's return minus a very small fee.

This passive approach keeps costs low and has historically outperformed the majority of actively managed funds over long periods. It also provides broad diversification in a single purchase.

Index funds are a foundation of long-term investing, especially when combined with dollar-cost averaging. They let ordinary investors capture the market's growth without picking individual winners.

Example

An S&P 500 index fund rises and falls in line with the 500 largest U.S. companies it holds.

Related terms

ETFEquitiesDiversificationPortfolioDollar-Cost AveragingTradingMarket CapitalizationEquitiesSector RotationEquitiesDefensive StocksEquities

Put it to work

Browse stock researchSee these concepts appliedInvesting calculatorsRun the numbersCongressional tradesFollow the money

Index Fund — FAQ

What is Index Fund?

An index fund is a fund designed to track the performance of a specific market index, such as the S&P 500, by holding the same securities in the same proportions.

Can you give an example of Index Fund?

An S&P 500 index fund rises and falls in line with the 500 largest U.S. companies it holds.

The term is free. The call is membership.

Index Fund is the vocabulary. Members get the monthly thesis that uses it: what changed, who could benefit, and what would prove the view wrong. $15/month or $150/year.

Get this month’s call for $15

$15/mo or $150/yr · cancel future renewals anytime · sources included