What are Index Funds?

An index fund is a mutual fund that imitates the portfolio of an index. These funds are also known as index-tied or index-tracked mutual funds. These funds are passively managed as the main objective of index funds is to track and emulate the performance of a popular stock market index such as S&P BSE Sensex and NSE Nifty 50. The asset allocation of an index fund would be the same as that of its underlying index. It is for this reason that the returns offered by index funds are comparable with its underlying index.