Index Fund
Tracks a market index, offering broad-based exposure and lower costs.
Detailed Description
Index Fund
What is the primary purpose of an index fund?
The primary purpose of an index fund is to replicate the performance of a specific market index, providing broad exposure to a range of securities.
How do index funds differ from actively managed funds?
Index funds are passively managed and automatically invest in the securities of a target index, whereas actively managed funds rely on portfolio managers to make investment decisions.
What are the benefits of investing in index funds?
Benefits include diversification, cost efficiency, simplicity, and historically consistent performance.
What risks are associated with index funds?
Risks include market risk, lack of flexibility, and tracking error.
How can investors purchase index funds?
Investors can purchase index funds through brokerage accounts, retirement accounts, or robo-advisors.