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Glossary · Investing

Index fund

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By the Money Guide editorial team · Editorial responsibility: Kaiser Khan, Editorial Director · How we check facts

Definition: An investment fund (mutual fund or ETF) that tracks a market index such as the FTSE All-Share or MSCI World, instead of trying to beat the market.

Index funds usually charge lower fees than active funds — often 0.05–0.30% versus 0.50–1.50%. Over long horizons, lower fees compound into materially higher returns.

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