A stock market index fund is a type of mutual fund or exchange-traded fund (ETF) that aims to track the performance of a specific stock market index. A stock market index is a statistical measure that represents the performance of a group of stocks that share common characteristics, such as being listed on a particular stock exchange or belonging to a specific industry.
Index funds are designed to replicate the performance of the underlying index by holding a diversified portfolio of the same stocks in proportions that mirror the index. The goal is not to outperform the market but rather to match its performance. This passive investment strategy contrasts with actively managed funds, where fund managers aim to outperform the market by selecting specific stocks based on research and analysis.
