An index fund is a mutual fund that mirrors as closely as possible the performance of a stock market index. For example, many mutual fund companies have since established S&P 500 index funds to mirror that index by purchasing all 500 stocks in the same percentages as the index.
· Index funds track markets closely instead of trying to outperform them
· Index funds tend to be much cheaper since there are no highly paid managers to pick stocks
· Index funds delay capital gains taxes because stock turnover (buying and selling) is low.
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