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What is an index fund?

Investing in an index fund is a form of passive investing.

Index funds attempt to track the performance of a particular stock or bond index, such as the S&P 500 or the Barclays U.S.Aggregate Bond Index, by holding most or all of the securities that are included in that index. For the most part, index funds do not look to outperform their benchmark, but rather match the benchmark's performance.

Index funds generally have a lower fee structure than actively managed funds, because they're not as costly to manage.

Adam Nash, CEO of Wealthfront, explains.

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