An index fund is a type of mutual fund or exchange-traded fund (ETF) that holds the same assets that are part of a market index, such as the S&P 500. Because of that, the price of the index fund moves the same as the market index.<\/p>
Investing in ETF index funds is as simple as buying any other stock on the stock market. Here\u2019s how it works:<\/p>
An index fund tracks a market index, such as the S&P 500 or Nasdaq. These funds are made out of multiple stocks or other assets. That\u2019s why the index fund performs similarly to the market index it tracks.<\/p>
There are thousands of indexes to choose from, including those that track large companies, small companies, foreign companies, commodities like gold and silver and more. The most popular ones are:<\/p>
Depending on which index you want to invest in, there could be multiple ETFs tracking it. For example, more than 15 ETFs track the S&P 500. The performance of all these ETFs is virtually the same; the difference is which company owns the index \u2014 whether it\u2019s Vanguard, MSCI, iShares, Invesco or others.<\/p>
Additional aspects to consider before you choose a fund are:<\/p>
Here\u2019s how to buy an index fund from a brokerage account:<\/p>
Compare broker platforms to find the right one for your needs. Those who want to frequently trade ETFs, should consider a brokerage with $0 commissions on ETFs, like Questrade<\/a> (free to buy, but there\u2019s a fee to sell) or Wealthsimple<\/a>.<\/a><\/p>Compare brokers to invest in index funds<\/h3>