This type of fund brings together the money from multiple investors to purchase a variety of investments (bonds, stocks, or securities) that combined, make up a specific market index. While considered more of a passive investment, they are also less risky as they track an entire market index, which historically increases in value over time.
An index fund differs from a mutual fund in that an index fund is typically more reliable seeking average market returns, while a mutual fund actively tries to deliver better than average returns for its investors. Mutual funds can have higher fees and less predictability than index funds. For investors looking for a relatively consistent investment, an index fund might be the better choice.