Index funds are synonymous with many ETFs. They seek to track the value of a market index – for instance the FTSE 100 Index that benchmarks the value of UK equities – rather than beating the index.
Index investing: The new trend
Index investing, also called passive investing, has increased rapidly in popularity and is the main method of investing practised by ETFs. While active investors in traditional mutual funds seek to perform better than an index, with mixed success, passive investors recognise the limitations of human investors and just seek to track the value of an index.