A type of mutual fund or ETF designed to track a specific market index, such as the S&P 500 or NASDAQ-100. Instead of trying to beat the market through active management, an index fund simply holds the same stocks (or bonds) as the index it follows, in the same proportions. This approach aims to match the market's performance while keeping costs low.
An S&P 500 index fund holds shares in all 500 companies in that index. If you invest $1,000 in this fund, your money is automatically spread across all 500 stocks in the same way they're weighted in the index. You'll earn returns that closely match the overall performance of those 500 large American companies.
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