Index fund

An index fund (also index tracker) is a mutual fund or exchange-traded fund (ETF) designed to follow certain preset rules so that it can replicate the performance of a specified basket of underlying investments.

The main advantage of index funds for investors is they do not require much time to manage—the investors will not need to spend time analyzing various stocks or stock portfolios. Most investors also find it difficult to beat the performance of the S&P 500 index; indeed passively managed funds, such as index funds, consistently outperform actively managed funds. Thus investors, academicians, and authors such as Warren Buffett, John C. Bogle, Jack Brennan, Paul Samuelson, Burton Malkiel, David Swensen, Benjamin Graham, Gene Fama, William J. Bernstein, and Andrew Tobias have long been strong proponents of index funds.

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