Index Fund
An index fund is a type of mutual fund or exchange-traded fund (ETF) designed to track the performance of a specific market index, such as the S&P 500 or the Dow Jones Industrial Average. Index funds are passively managed, meaning they are not actively managed by a fund manager. Instead, the fund manager simply buys and holds the same securities that are included in the index it is tracking. This allows index funds to have lower management fees than actively managed funds, as well as lower turnover costs.
History of Index Funds
The concept of index funds was first proposed by John Bogle in 1975. Bogle, the founder of the Vanguard Group, argued that most actively managed funds were unable to outperform the market, and that investors would be better off investing in a fund that simply tracked the market. Bogle’s idea was met with skepticism at first, but eventually gained traction and index funds became popular with investors. Today, index funds are one of the most popular types of mutual funds and ETFs.
Comparison of Index Funds
| Fund | Expense Ratio | Turnover Ratio |
|---|---|---|
| S&P 500 Index Fund | 0.05% | 5% |
| Dow Jones Industrial Average Index Fund | 0.07% | 7% |
| NASDAQ Composite Index Fund | 0.08% | 8% |
Summary
Index funds are a type of mutual fund or ETF that track the performance of a specific market index. They are passively managed, meaning they are not actively managed by a fund manager. This allows index funds to have lower management fees and lower turnover costs than actively managed funds. For more information about index funds, you can visit websites such as Investopedia, Morningstar, and The Motley Fool.
See Also
- Mutual Fund
- Exchange-Traded Fund (ETF)
- Active Management
- Passive Management
- Market Index
- S&P 500
- Dow Jones Industrial Average
- NASDAQ Composite
- Vanguard Group
- John Bogle
