Index Fund
An index fund concentrates is holdings on stocks that are part of the major market indices, for instance the S&P 500 as opposed to an actively-managed fund that will attempt to outperform the indices through market knowledge and strategic stock picking.
Because index funds are managed in such a way as to mimic the make-up of the given index, there will be fewer trades in such a fund and thus the fund will have lower trading expenses and will incur fewer short-term capital gains.
Additional savings in an index fund include fees for research associated with stock picking. Normally a computer model is used in an index fund to identify changes to the given indices thus indicating when adjustments need to be made to the find itself to realign it with the prevailing position of the index.
Since some wisdom suggests that mutual funds do not actually out perform the market, many investors find index funds attractive because they offer the management advantages of regular mutual funds while following stocks that are performing well according to the chosen index.
More Terms Explained here