Also called passive fund
Index fund
A fund that buys everything in an index rather than trying to pick winners. It is the default against which any active strategy has to justify itself.
Updated 2026-09-05
An index fund buys everything in a published index in the published proportions. There is no manager deciding what looks attractive, which is the point: it makes the fund cheap, predictable and impossible to be wrong-footed by.
The case for it is arithmetic rather than ideological. All investors together hold the market, so the average actively managed dollar must earn the market return before costs and less than it after. That is true regardless of how skilled any individual manager is.
See also
- ETF — A basket of securities that trades on an exchange like a single stock. Most track an index, charge very little, and can be bought and sold all day.
- Expense ratio — The annual percentage a fund charges. It comes out whether the fund gains or loses, and over decades it compounds against you exactly as returns compound for you.
- Diversification — Holding enough uncorrelated positions that no single one can ruin you. It removes company-specific risk and cannot touch market risk.
Educational content, not investment advice. Angie explains how a valuation is built so you can judge it yourself. What you do with that is your call.
