are index funds good investments 
index funds are very popular among investors they offer a simple no fuss way to gain exposure to a broad diversified portfolio at a low cost for the investor they are passively managed investments and for this reason they often have low expense costs in bull markets these types of funds can provide attractive returns as the market rises lifting all boats they do come with disadvantages however one is the lack of downside protection in prolonged downtrends these funds can perform very poorly in line with the broader market index mutual funds vs index etfsif you re interested in index funds you ll likely have to choose between investing in mutual funds or etfs that track specific indexes both are funds replicating the performance of a specific market index however they differ in several key aspects that can influence your decision depending on your investment goals and strategy index mutual funds pool money to buy a portfolio of stocks or bonds investors buy shares directly from the mutual fund company at the net asset value nav price which is calculated at the end of each trading day among the main advantages of index mutual funds in the chart below are the simplicity of automatically reinvesting dividends and dollar cost averaging making regular set contributions index etfs meanwhile are traded on exchanges like individual stocks this lets investors employ far more trading strategies timing etf share trades using limit or stop loss orders short selling etc which are among the benefits of index etfs found below find out investopedia s 10 rules of investing by ordering a copy of our special issue print edition example of an index fundindex funds have been around since the 1970s but have exploded in popularity over the past decade or so the fund that started it all founded by vanguard chair john bogle in 1976 remains among the best as judged by its long term performance and low cost the vanguard 500 index fund has tracked the s p 500 faithfully in composition and performance as of march 2024 vanguard s admiral shares vfiax posted an average 10 year average annual return of 12 75 vs the s p 500 s 12 78 a very small tracking error 12 the expense ratio is low at 0 04 and its minimum investment is 3 000 