Key features
By mechanically investing in the constituent stocks of an index in roughly the same proportions, an index fund aims to replicate the index's price movements. Because the research costs involved in stock selection are relatively low, expense ratios tend to be set at a lower level as well.
What to keep in mind
An index fund does not aim to outperform its benchmark index, and if the index falls, the fund's net asset value falls in the same way. It is important to select a fund based on an understanding of the characteristics of the tracked index's price movements — such as its constituent stocks, region, and asset class.