Index Fund
Passive market exposure at rock-bottom cost
Definition
An index fund is a type of mutual fund or ETF designed to replicate the performance of a specific market index, such as the S&P 500 or Nasdaq 100. Index funds use passive management — buying all or a representative sample of the securities in the index — rather than active stock selection. They offer broad diversification, low fees, and historically competitive returns compared to actively managed funds.
Example
The Vanguard S&P 500 Index Fund (VOO) holds all 500 companies in the S&P 500. If Apple is 7% of the index, VOO holds 7% of its assets in Apple. With an expense ratio of 0.03% per year, it is far cheaper than actively managed funds that average 0.60%+ in fees.
Related Terms
Frequently Asked Question
What is an index fund?
An index fund passively tracks a market index like the S&P 500. It offers instant diversification at low cost. Most index funds outperform actively managed funds over 10+ years after fees.
APA Citation
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· Source: VixShield Trading Glossary — From SPX Mastery by Russell Clark
⚠️ Not financial advice. This definition is educational content from the SPX Mastery book series by Russell Clark (VixShield). Past performance is not indicative of future results. Trading options involves substantial risk of loss and is not appropriate for all investors. Always paper trade before risking real capital.