Understanding Index Funds
A beginner's guide to passive investing with index funds
1 min read
Nov 25, 2025
What is an Index Fund?
An index fund is a type of mutual fund or ETF designed to track a specific market index, like the S&P 500.
Why Index Funds?
| Feature | Index Funds | Active Funds |
|---|---|---|
| Fees | Low (0.03-0.20%) | High (0.5-2%) |
| Performance | Matches market | Often underperforms |
| Diversification | Built-in | Varies |
| Management | Passive | Active |
Popular Index Funds
- VTI: Vanguard Total Stock Market
- VOO: Vanguard S&P 500
- VXUS: Vanguard Total International
- BND: Vanguard Total Bond Market
How to Get Started
- Open a brokerage account (Fidelity, Vanguard, Schwab)
- Choose your index funds
- Set up automatic investments
- Hold for the long term
Conclusion
Index funds are the simplest way to build wealth over time. Low fees and broad diversification make them ideal for most investors.