Stock index funds

Various stock markets have been operating across the world for decades and have been helping general investors, brokers and capitalists to profit from them. Both the national as well as global economy is deeply impacted by what happens in the markets. And it is also the opposite, that is what happens in the world of business also impacts the stock markets. On the other hand, stock index funds are something very recent. Recent they may be, but they are already beginning to make people take notice as their popularity is on the rise.

There are a few fundamental differences. Index funds will typically have much lower annual expenses than an actively managed fund. That is one advantage. There are others as well. Index investors never try to beat the market, they just aim to keep pace with the market index.

Here are a few stock index funds

Fidelity Spartan US Equity Index (FUSEX) is a stock index fund based on the Standard & Poor's 500 Index. An investment in FUSEX will give a return of the S&P 500 over the same holding period less the mutual fund's annual expense ratio of .17 percent.

The Dow Jones Industrial Average (DJIA) is an index of 30 US stocks. DJIA is a simple average of the prices of the 30 stocks in the index, adjusted for stock splits and stock dividends.

Standard & Poor's 500 is an average of the 500 largest capitalization stocks of US companies selected by the Standard & Poor's Index Committee. It is a capitalization-weighted index that considers the price of a stock and the number of outstanding shares.

Vanguard Total Bond Market Index (VBMFX) approximates an investment in the Lehman Brothers Aggregate Bond Index. The mutual fund does not actually own more than 6,700 bonds that comprise the index. Just a few bonds is sufficient to capture the average risk and maturity of the index to provide investors a return close to the actual index less annual expenses of .22 percent.