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Index funds invest in the same assets using the same weights as the target index, typically stocks or bonds Index funds provide broad market exposure and diversification across various sectors. Index funds are considered less expensive and less risky for investors An index fund is a group of investments that aims to mirror the performance of an existing market index Index funds tend to offer investors lower costs and taxes than some other types of funds. Instead of picking individual stocks, an index fund tracks the performance of a specific market benchmark—or index, like the popular s&p 500 index—as closely as possible. What is an index fund An index fund is a type of investment fund with a portfolio built to track or match financial market index components, such as the standard & poor's 500 index (s&p 500). To mirror the market or a portion of it For example, an s&p 500 index fund tracks the collective.