An index fund, or ETF, is an investment vehicle that attempts to replicate the performance of a particular index of stocks or other assets, for example, replicating the performance of a market or sector.

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How is the price of an index fund affected?

The indices are made up of selected stocks that represent a particular sector or market, and each stock in the index has a certain weighting in the total value of the index. In the case of indices such as the S&P 500, the weightings of stocks are based on market capitalization, meaning that stocks with higher market capitalization have a larger weighting in the index.

The aim of index funds is to provide investors with diversified investments among a wide range of stocks without the need to select individual stocks separately. Index funds can also be beneficial for those who want to invest in the stock market but do not have the time or knowledge to select stocks independently.