A type of ETF or mutual fund that simply tracks a big slice of the market, like the 500 largest U.S. companies (the S&P 500), rather than trying to hand-pick winners. Because nobody’s actively managing the picks, the fees are usually very low. One of the most consistently recommended strategies for everyday investors.
Walk through the numbers
An S&P 500 index fund owns the 500 large U.S. companies in that index. If the index rises 8% in a year, the fund rises about 8%, minus a small fee such as 0.03%.
Low fees and broad variety make index funds one of the most recommended starting points for everyday investors.
Related terms
For education only and not personalized investment advice. Examples are hypothetical illustrations, not a prediction or a promise of results. All investing involves risk, including the possible loss of principal.