Indexes - or indices - are collections of selected stocks or other investments. Some of the best known indexes include the S&P 500, which tracks the share price performance of the 500 largest companies listed on the US exchanges, or the ASX 200, which tracks the largest 200 companies listed in Australia. But there are also indexes that track sectors and industries, like technology or clean energy, as well as bonds, IPOs, currencies, growth stocks and more.
Index funds track these indexes, allowing investors to track their performance. They do this by allowing to buy a basket of shares that matches the composition of the index with just a single trade, rather than trying to buy all the stocks in a given index individually.
Index funds can be bought as either exchange-traded-funds (ETFs) or as mutual funds, but ETFs will almost always have lower costs and can be bought and sold on the CMC Markets Invest platform like any other share.