Index fund

A fund built to track a market index, such as a broad stock index, rather than to beat it.

Example

A fund holding all the companies in a major stock index, in proportion to their size.

An index fund's return is the market's return minus a small fee - by design, it will never beat the index it tracks.

Passive management — Buying a broad, pre-set basket of investments, an index, rather than trying to pick winners.
Expense ratio — The annual fee a fund charges, expressed as a percentage of the money you have in it.
Active management — A fund manager, or you, picking specific investments in an attempt to beat a benchmark.

A fund is a wrapper, not an asset class of its own — Buying a fund buys a proportional claim on whatever it holds. Until you have opened the holdings list, the name on the ticket tells you almost nothing about what you own. (9 min)
What a fund does that nothing else does, and what having it costs you — It converts a sum too small to spread into a spread sum, in one transaction. In exchange you buy every holding at somebody else's weights, including the ones you would never pick. (10 min)
Active versus passive investing — Trying to beat the market versus simply owning it. One costs more and rarely wins; the other is unglamorous and usually does better after fees. (11 min)