What are index funds?


An Index fund or an index tracker is a mutual fund or an exchange traded find (ETF). So before defining what an index fund is, it is important to understand what a mutual fund and exchange traded fund are.

What is a mutual fund?


This is a pool of money collected from investors and invested in securities. These securities include stocks, bonds and short term instruments like treasury bills, certificates of deposit (CDs), commercial papers, bills of exchange and others.

While Exchange traded funds (ETFs) are made up of assets such as s, bonds, commodities, forex, oil, future stocks

What then is an index fund?


An index fund is a mutual fund or exchange traded fund (ETF) designed to follow predefined rules so that the fund can track the members of a financial market index (a market index is a speculative portfolio of investments representing a segment of the financial market) index fund is also known as “index tracker”

Index funds follow their benchmark index independent of what happens in the market.

Why are index funds recommendable?


Index funds offer the option of immediate diversification. One purchase of index funds comes with a portfolio of diversified companies. A share of one index fund grant ownership of sometimes, hundreds of companies to a single investor. An added benefit maybe the option of enjoying dividend policy flexibility.

It has a low operating cost. Little is charged for higher benefits accruable...


https://ayietim.com/2021/07/24/is-index-fund-the-best-for-beginner-investors/