Definition
A type of investment fund that tracks a market index, like the S&P 500. It offers diversification at a low cost, making it popular with beginners.
What to consider
- They offer broad market exposure with lower fees.
- Keep a long-term view and avoid daily market jitters.
- Review performance periodically, but focus on overall trends.
Real world scenarios
- Gloria invests in an S&P 500 index fund for hands-off diversification across major U.S. companies.
- Marcus appreciates the low fees of an index fund compared to many actively managed alternatives, boosting his net returns.
- Regular contributions to a broad index fund shape Tanya’s long-term retirement strategy, letting her ignore daily market swings.
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