An index fund is a mutual fund or exchange-traded fund (ETF) designed to follow certain preset rules so that the fund can track a specified basket of underlying investments.
Those rules may include tracking prominent indexes like the S&P 500 or the Dow Jones Industrial Average or implementation rules, such as tax management.
Index funds have gotten a lot more complex and varied since Jack Bogle created the first index fund back in 1976.
They still offer the best way for a typical investor to achieve broad diversification across an asset class without having to spend very much on buying individual securities or paying the high fees associated with actively managed mutual funds.
But investors can now use index funds to gain additional exposure to certain markets, sectors, or even investment styles.
In this video, Jack Bogle commented on benefits and risks of investing in different types of index funds, including cap-weighted, fundamental-weighted, and equal-weighted index funds.
Please note that this video is to show you John Bogle’s view about different types of index funds. Please do your research before doing any investment. A good balance between return and risk is the key to investment success.
Source: Finance Jane (Shared via a Creative Commons CC-BY license)
