Index Fund
An index fund aims to match the performance of a market index instead of trying to beat it.
Why this matters
Index funds are a common beginner choice because they are simple, diversified, and often low cost.
Simple example
An S&P 500 index fund owns stocks that mirror the S&P 500 index.
Common mistakes
- Assuming all index funds have the same fees and tracking quality.
- Ignoring what index the fund actually follows.
- Treating index investing as risk-free.