3.1.2.5 Index Funds
Index funds are mutual funds set up to track the returns of a specific market index. An index contains a group of securities meant to represent a particular market segment.
Well-known indexes include:
- -S&P 500 (500 large capitalization stocks)
- -Wilshire 5000 (total US stock market)
- -Russell 2000 (small capitalization stocks)
- -MSCI EAFE (foreign stocks)
- -Bloomberg Barclays US Aggregate Bond Index (total US bond market)
- -Nasdaq Composite (stocks listed on the Nasdaq exchange)
- -Dow Jones Industrial Average (30 large-cap, blue-chip stocks)
An index fund will typically hold securities -- stocks or bonds-- in the same proportion as the index it is trackin