Index Fund
An index fund is a type of investment fund that aims to match the performance of a stock market index, such as the FTSE 100 or S&P 500, rather than trying to beat it.
What it means
An index fund is a type of investment fund that aims to match the performance of a stock market index, such as the FTSE 100 or S&P 500, rather than trying to beat it. Because it simply tracks an index, it usually has lower costs than actively managed funds.
You invest in a global index fund that automatically owns small pieces of thousands of companies around the world.
Why it matters
Many long-term investors use index funds because they're simple, low-cost and highly diversified.
If a company leaves the index, the fund automatically updates its holdings to keep tracking it.
Why do people recommend index funds?
They provide broad diversification at a relatively low cost and remove the need to pick individual companies.