What is an index fund?

    Published: 06-16-2009
    Views: 9,943
    Financial Advisor David John Marotta defines an index fund.

    David John Marotta

    David John Marotta is the President of Marotta Wealth Management, a fee-only financial planning and asset management firm in Charlottesville, Virginia. He is an oft-quoted writer and speaker on financial matters and his weekly financial column can be found at www.eMarotta.com

    Host: What is an Index Fund?

    David Marotta: An Index Fund is an investment fund that tries to follow an Index. So for example an Index Fund might be an S&P 500 fund, it's trying to follow the S&P 500 fund index as much as possible. Because they are not making decisions about which stocks are better and which stocks are not, they just want to follow the index, it's has much lower expense ratios. You dont have to pay analysts because the index doesnt change very frequently, you dont have to buy and sell stocks as frequently. So, the index sort of moves -- the fund moves in sync with the index with very low expenses to the investor.