Question

What is an index fund?

Short answer

It is an investment strategy that employs a rules-based fund.

Step-by-step solution

Definition of Mutual fund.

A mutual fund is indeed a collection of assets from several different types of investors.

Explanation of solution.

An indexing fund is a type of mutual fund that is intended to follow established guidelines in order to monitor a specific set of trends. Investors do not have to be concerned and can focus on analyzing the stocks. Their investment will be in line with the current trend. S&P 500 is the most popular index fund in the United States, and it is based on S&P Dow Jones Indices' criteria.

They are a collection of firms whose stocks are classified in groups based on their size, qualities, and income. Overall, and has a more diverse portfolio with lower fees and operational costs because companies who do not follow the rules are removed from the fund, and there is no need for active management to inspect and track things.