Investors in US companies have enjoyed some stellar returns over the last five years, thanks to the soaring price of technology stocks such as Apple, Amazon, and Google. However, not all investors have been able to capitalize on these gains. Many have struggled to pick individual stocks or find mutual funds that can consistently outperform the market.
This is where index funds come in. An index fund is an investment fund – either a mutual fund or an exchange-traded fund (ETF) – that is based on a preset basket of stocks, such as the S&P 500. Index funds are designed to match the performance of their underlying index, rather than trying to beat it.
The S&P 500 Index is one of the most widely used benchmarks for the US stock market. It features the 500 largest publicly traded companies in the US and is considered a proxy for the overall health of the US economy. S&P 500 Index Funds are passive investments allowing investors to match the performance of the S&P 500.