DayCents

Index Fund

An index fund is a mutual fund or ETF that simply holds every stock (or bond) in a market index, like the S&P 500, instead of trying to beat it. Because there's no expensive stock-picking, fees are tiny — and decades of data show most active managers fail to outperform a low-cost index after costs.

The result is instant diversification across hundreds or thousands of companies for a fraction of a percent per year. Index funds are the default building block of most retirement portfolios precisely because low fees and broad exposure compound into a big edge over time.