INDEX MUTUAL FUNDS In a world of complex investment products, one of the easiest to understand may also be appropriate for a variety of individual financial goals. The appropriateness of an investment depends on personal goals, but many individual and institutional investors have turned to index investing, a strategy that attempts to approximate the performance of a broad market index. Indexing an investment strategy began in the early 1970s in the United States, when large institutional investors used it as a low-cost way to obtain long-term competitive performance for retirement and other investment programs. The index fund concept was introduced by Vanguard Funds. More recently, index funds have gained popularity among individual investors as a relatively conservative approach to investing in the stock market. Investment professionals stress the importance of including stocks in any individual long-term strategy due to their historically better performance compared to other investments and inflation. Most investors believe that stocks are “efficiently priced,” meaning their prices reflect all relevant information, so it is difficult to consistently outperform the market through active management. Therefore, a mutual fund that seeks to reflect the market rather than beat it can be a simple and cost-effective way to gain broad equity exposure. By definition, index mutual funds cannot outperform the market. However, funds can't even give you the same returns as the market index they track. Because there are some fees and expenses related to index funds. In 1884 Charles H. Dow, first editor of the Wall Street Journal and founder of the Dow Jones Company, conceived the concept of measuring the performance of a stock market with an index of stocks based on an average which was the predecessor of the Dow Jones Industrial Average. Over the years, a huge number of indexes have developed, including the Standard & Poor's 500 stock index, established in 1957. Nowadays, most money invested in index funds tracks the S&P 500 index. Known as the standard for measuring large-cap U.S. stock market performance, this index includes a representative sample of leading companies across major industries. It is a market value weighted index and the weight of each stock in the index is proportional to its market value. The S&P 500 is used by 97% of U.S. money managers and pension plan sponsors. It represents approximately 80% of the total market value of all U.S. common stocks. More than $1 trillion is indexed to the S&P 500.