Index fund

An index fund comprises a portfolio of securities that is structured so investors gain exposure to a selected market.

Two key approaches to managing index portfolios are full replication and optimisation. Full replication portfolios hold every stock or security in an index in proportion to the total market. Optimisation uses a statistical, risk-matching process to design a representative sample of securities in a market at a lower cost than if using full replication. For more information about methods of indexing, read: Vanguard's indexing basics.

Index funds can be used to track domestic and overseas shares, bonds, and property trusts. (See Passive investment management)
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