An index fund is a mutual fund, sometimes trading as an ETF, that allows an individual to “invest” in an index, such as the S&P 500. Index funds are designed to give investors returns that are in line with the index. So if you’re investing in an S&P 500 index fund, your returns should mirror those of the S&P 500. There are many funds designed to track a whole host of indexes that include everything from small-cap stocks, emerging markets, and specific industries. Index funds are an example of “passive” investing.