GLOSSARY · INVESTING

Index fund

A mutual fund or ETF that holds the securities in a published market index, in roughly the index's proportions, instead of picking which ones to own. Because it trades little and pays no stock pickers, it usually costs far less than an actively managed fund. It earns the index's return minus its costs, so it falls with the market as well as rising with it.

Also called: index mutual fund, index ETF, passive fund, tracker fund, index tracker, passive investing

COMPUTE IT WITH YOUR NUMBERS

Investment fee / expense ratio impact →How much will a 1% fee cost me over 30 years?

LEARN IT PROPERLY

CHAPTER · INVESTMENT FOUNDATIONS · FOUNDATIONSWhat You Own When You Buy a Stock CHAPTER · INVESTMENT FOUNDATIONS · FOUNDATIONSHow Markets Work: Exchanges, Orders and Indexes

SOURCES

Index Funds. U.S. Securities and Exchange Commission, Investor.gov.
Mutual Fund Fees and Expenses. U.S. Securities and Exchange Commission, Investor.gov.
The Arithmetic of Active Management. William F. Sharpe, Financial Analysts Journal, 1991.

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