Index Funds

Vanguard Mutual Funds presented the first index mutual fund designed to replicate and mirror the performance of the widely recognized S&P 500 index, an index of 500 prominent U.S. companies.

Exchange Traded Funds

The first ETF, known as the Standard and Poors Depositary Receipt, was also created to replicate the S&P 500 index and is also unmanaged. Unlike an index fund, however, ETFs trade on exchanges in the same manner a stock does.

Diversification

Since their introductions, both index funds and ETFs have broadened their coverage by tracking an increasing number of underlying indexes. In addition to holding a diversified list of securities within them, they can also be selected for coverage of other industries, countries and even for size of companies represented.

Costs

References

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