INDEX FUND Meaning and
Definition
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An index fund refers to a type of mutual fund or exchange-traded fund that aims to closely replicate the performance of a specific market index. It is designed to provide investors with exposure to a broad range of securities included in the index in an efficient and cost-effective manner. Index funds are passive investment vehicles that do not attempt to outperform the market; instead, they seek to mirror the performance of a designated benchmark index, such as the S&P 500 or the Dow Jones Industrial Average.
The primary characteristic of an index fund is a portfolio of securities structured to match the weightings and composition of the index it tracks. The stocks or bonds included in the underlying index set the investment rules governing the fund, and the fund manager's role is to regularly adjust the portfolio holdings to align with changes in the index. This approach ensures that the fund closely follows the index's performance and delivers returns similar to those of the broader market.
Due to their passive management style, index funds typically have low expense ratios and lower turnover rates compared to actively managed funds. This makes them an attractive option for long-term investors seeking exposure to a specific market or sector while striving for higher returns. Index funds provide diversification by investing in a wide range of securities within the index, reducing the idiosyncratic risk associated with individual stocks or bonds. Overall, index funds offer an accessible and efficient way for investors to gain broad market exposure with low costs and minimal effort.
Common Misspellings for INDEX FUND
- undex fund
- jndex fund
- kndex fund
- ondex fund
- 9ndex fund
- 8ndex fund
- ibdex fund
- imdex fund
- ijdex fund
- ihdex fund
- insex fund
- inxex fund
- incex fund
- infex fund
- inrex fund
- ineex fund
- indwx fund
- indsx fund
- inddx fund
- indexfund
Etymology of INDEX FUND
The term "index fund" has a straightforward etymology. The word "index" comes from the Latin word "indicēs", which means "to show" or "to indicate". It has been used in English since the early 16th century with the meaning of a list or indicator.
The word "fund" comes from the Latin word "fundus", which translates to "bottom" or "piece of land". In financial contexts, a "fund" refers to a sum of money set aside for a specific purpose.
When combined, "index fund" refers to a specific type of investment fund that aims to track or replicate the performance of a particular index, such as the S&P 500. The term has been commonly used since the advent of passive investing in the mid-20th century.
Similar spelling words for INDEX FUND
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