An index fund is a type of investment fund designed to track the performance of a specific market index, such as the S&P 500 or the Dow Jones Industrial Average. Instead of actively managing investments, index funds passively replicate the holdings of the chosen index, which often leads to lower fees and expenses for investors. Investing in an index fund allows individuals to gain broad exposure to a diverse range of stocks or bonds within the index. This strategy can help reduce risk and provide a more stable return over time, making index funds a popular choice for both beginner and experienced investors.