Index Fund
A mutual fund or ETF that simply tracks a market index instead of trying to beat it.
Index funds replicate benchmarks like the S&P 500, the Russell 2000, or the total U.S. stock market. Because there is no active stock picking, expense ratios are extremely low: Vanguard’s flagship VFIAX is 0.04%, Fidelity’s FZROX is 0%. The SPIVA Scorecard (S&P Dow Jones Indices) consistently shows that 80% to 90% of actively managed U.S. large-cap funds underperform the S&P 500 over 15-year periods. For most people, a low-cost broad-market index fund is the entire equity portfolio they need.
Inside Finlo
A 60-second lesson that puts this term in context, alongside the others, lives inside the Finlo app.