Index fund - Financial definition
Financial acronyms
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Concise definition of the term index fund
An index fund is a mutual or exchange-traded fund the objective of which is to replicate the composition and performance of a reference index as closely as possible.
Comprehensive definition of the term index fund
The objective of index funds is to match the performance of the indexes they track, which they generally manage to achieve. Index funds
are so-called passive funds, which means that the fund manager does not actively make any investment decisions, but only replicates adjustments
which become necessary as the composition of the index changes. Therefore, index funds are generally charging much lower fees than actively managed
funds.
The major inconvenient of index funds is that they are bound to follow their reference index, whatever the performance perspectives are, and
cannot deviate from this, even if other assets are likely to perform better.