Mutual Funds/Total Equity Index Funds
1. Is a total equity index mutual fund a fund that invests in stocks that comprise or make up the NASDAQ, Russell 2000, DJIA, and the S&P 500 indices and perhaps others?
2. What exactly is an index?
3. Would it be incorrect to refer to the S&P 500 and other indices or indexes as stock markets?
I thank you for your reply.
Hi. In regards to your questions,1) yes, a total equity index fund compromises several parts of the market. For example, the Vanguard Total Market Index is designed to track the Wilshire 5000 index which is an index that is comprised of the largest 5000 US publically traded companies. However, keep in mind, that many traditional indexes are cap weight which means the largest companies make up the proportionate largest share of the index so even though there are many different companies, a total market index fund can perform very similarly to the S&P 500 index. 2) an index is a way to track different areas of the stock market for performance comparison by grouping a large number of companies within. Also keep in mind indexes are created by companies, which helps them sell products used for investment in these created index. For example, standard and poors and Wilshire are two common index companies that establish indexes, 3) indices are a group of companies that are part of the stock market that are categorized within the index. In other words, indexes are portions of the stock market. I hope this helps.