How To Guide For: A Look At Index Funds & How They Work

An index fund is a type of mutual fund with a portfolio constructed to match or track the components of a market index, such as the Standard & Poor's 500 Index (S&P 500). Index funds have ticker symbols and are traded on all major exchanges. The only time an index buys or sells a stock is when the index itself changes in weighting or in composition. An index mutual fund is said to provide broad market exposure, low operating expenses and low portfolio turnover. When purchasing a share of an index fund, the investor is purchasing a share of a portfolio that contains the securities in an underlying index. The index fund holds the securities in the same proportion as they occur in the actual index, and when the index decreases in value, the fund's shares decrease as well, and vice versa. To get more information on index funds and how they work click on the pictures below to read the articles.