This article is from the How to Start an Investment Program tutorial, author unknown.
Many of the large mutual fund families offer Index Funds. To date, the most popular one is the Vanguard Index 500 that has had a great four year run. From 1995 through 1998, the fund had a cumulative gain of 122.14%. Without a doubt, these are phenomenal results and it's highly unlikely that they will continue at this blistering pace.
But who knows when the bull market will be over? There are reasons that analysts point to for the recent success of index funds such as Vanguards Index 500, but I won't bore you with the details. Funds like these are for those who want predictable results, not rationale.
The key to finding an Index Fund that meets your needs is to understand what it is the fund is tracking. Besides the S&P 500 average that tracks the large, "blue chip" companies, there are Index Funds that track representative small companies, mid-size companies, and even the ENTIRE stock market.
The difference between Index Funds of different fund families is the expense ratio. This is the percentage off the top that the mutual fund company takes to run the fund. This ratio can vary significantly, so it is best to shop around. In the long run, this fee can make a big difference in your total return.
Index Funds, like other financial services, are purchased through brokerage houses. In the next section, I'll tell you how to go about finding the right place for you to open an account.