From 11:00PM PDT on Friday, July 1 until 5:00AM PDT on Saturday, July 2, the Shmoop engineering elves will be making tweaks and improvements to the site. That means Shmoop will be unavailable for use during that time. Thanks for your patience!
We have changed our privacy policy. In addition, we use cookies on our website for various purposes. By continuing on our website, you consent to our use of cookies. You can learn about our practices by reading our privacy policy.
© 2016 Shmoop University, Inc. All rights reserved.

Finance Glossary

Just call us Bond. Amortized bond.

Over 700 finance terms, Shmooped to perfection.

Index Fund

Definition:

See ETF vs. Index Fund.

An index fund is just a big fat basket of stocks or bonds geared to reflect a market "strategy" (i.e., whatever logic that consumers will buy). If you believed in sin doing well over time, you might try to find an index with tobacco, alcohol, gun sales, and gambling.  The more generic funds are those baskets that reflect a popular index like NASDAQ or the S&P 500 or the Dow. 

Here’s the composition of the Dow-Jones Industrials which are 30 big fat cap companies that are supposed to reflect the industrial strength of this country and the world (you have probably heard of a few):

3M
American Express
Apple
Boeing 
Caterpillar
Chevron
Cisco
Coca-Cola
Walt Disney
EI Du Pont
Exxon Mobil
General Electric
Goldman Sachs
Home Depot
IBM
Intel 
Johnson & Johnson
JP Morgan
McDonald’s
Merck
Microsoft
Nike
Pfizer
Procter & Gamble 
Travelers
United Technologies
United Health
Verizon
Visa
Wal-Mart