What is an index fund?

The video explains that many Americans struggle to understand financial terms, with index funds being particularly misunderstood. It describes index funds as investments that track market indexes like the S&P 500 or Dow Jones. These funds can be mutual funds or ETFs and are passively managed, meaning they mirror the index without active trading. This results in lower fees compared to actively managed funds. The video also provides guidance on how to invest in index funds, emphasizing the importance of choosing funds that closely match their benchmarks and considering associated costs.

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