An index fund is a mutual fund or ETF that holds the stocks in a market index, such as the S&P 500, so that its return matches the index's return before fees.
You invest $10,000 in a fund that tracks an index of 500 large US companies. If the index rises 8% over a year, the fund rises about 8%, and your $10,000 grows to about $10,800, less a yearly fee.
At a fee of 0.05%, that is about $5 on $10,000. A fund that picks stocks to try to beat the index might charge 0.75%, about $75 a year, and it may or may not beat the index after that fee.
On JagSim you can practice with index ETFs such as SPY, which tracks the S&P 500, QQQ, which tracks the Nasdaq-100, DIA, which tracks the Dow Jones Industrial Average, and IWM, which tracks the Russell 2000. They trade in whole shares during US market hours, like any stock. Index mutual funds are not traded on an exchange, so they are not on JagSim. Portfolio shows your return beside the S&P 500 on every plan, so you can see how your own picks compare with owning the index.
An index fund does not depend on anyone picking winners, so its return follows its market, up and down, at a low cost. That makes it the usual yardstick for any trader: a strategy that does worse than a cheap index fund over time is costing you.
They are cheap to run, spread money across many companies in one trade, and do not depend on a manager picking stocks. Their return follows the market.
An ETF is how a fund is packaged: it trades on an exchange. An index fund is a strategy: it tracks an index. Many funds are both, such as an S&P 500 ETF.
Yes. It falls when its index falls. A broad index fund removes the risk of one company, not the risk of the whole market.
The small gap between a fund's return and its index's return, caused by fees, cash held and trading costs.
Last updated: October 2026
Educational only. Not investment advice. JagSim is a simulator, not a broker.
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