Description: An index fund is a type of mutual fund or exchange-traded fund (ETF) that aims to replicate the performance of a specific market index, such as the S&P 500 or Nasdaq. These funds are designed to provide investors with a way to diversify their portfolio without the need to select individual stocks. The passive investment strategy they employ is based on the premise that, over the long term, indices tend to outperform most actively managed funds. Index funds typically have lower fees compared to active funds, as they require less management and analysis. Additionally, their structure allows investors to access a wide range of assets, reducing the risk associated with investing in individual stocks. In the broader context of financial markets, index funds have become popular as a means to achieve diversified investment exposure efficiently, thus facilitating investment in an environment that can be complex and risky.
