Definition
A pooled investment priced once daily. Index mutual funds are the classic 401(k) building block; the actively managed variety usually charges more and delivers less.
Why it matters
Mutual funds are how most 401(k) money is actually invested, and the index-versus-active choice inside that menu quietly decides a six-figure fee difference over a career.
Example
A 401(k) menu offers an S&P 500 index fund at 0.05% and an actively managed growth fund at 0.95%. On the same balance and market, the index holder keeps almost a percent more per year, every year.
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.