What is an index fund?

Rather than paying managers to choose winners, an index fund simply buys the shares in an index in the same proportions. John Bogle, founder of Vanguard, launched the first index fund for ordinary investors in 1976. Because they require little management, index funds usually have very low fees, and research consistently shows most actively managed funds fail to beat their benchmark over long periods. Warren Buffett has repeatedly recommended low-cost S&P 500 index funds for most investors. Index funds and exchange-traded funds now hold trillions of dollars of assets worldwide.