Index Funds are stock mutual funds designed to mimic the movements of a particular index. For example, a fund trying to mimic the movement of the Standard & Poor’s (S&P) 500, will either purchase every stock on the S&P 500 in the same ratio that those stocks appear on the index, or will purchase a representative sample of companies that closely approximate the index. Since index funds rarely change their holdings, they are typically cheap to hold and may do better for investors over the long haul.