What is the primary goal of an index fund?

The primary goal of an index fund is to track the investment return of a specific stock or bond index. Index funds are designed to replicate the performance of a specific market segment, such as the S&P 500 or the Dow Jones Industrial Average. By doing so, these funds provide investors with a way to gain exposure to a broad market portfolio without the need to pick individual stocks or bonds.

This passive management strategy usually results in lower fees compared to actively managed funds, as there is no need for extensive research or frequent trading of securities. The objective is to achieve returns that closely mirror the index it follows, with the performance of the fund typically aligned with the performance of the index over time. This relationship between the fund and the index is what defines the nature and purpose of index investing.