Consequently, we can get a picture of how the stock market is doing by looking at an index. An index is a basket of stocks constructed to represent the whole market or a subset of it. The evening news and the daily papers usually quote the Dow Jones Industrial Average which measures the performance of a basket of 30 stocks. There are many indices. For example there are indices to measure the performance of stocks with large market values and indices to measure the performance of stocks with small market values.
Some indices measure specific industries.
An index fund is a portfolio designed to track an index. It does not take much skill to create an index fund. One just buys the stocks in the index in proportion to their weight in the index. Since it doesn't take much skill to create an index, one can index inexpensively. Active vs. Passive Management Investors pay higher fees to managers who claim to offer better performance.