What is an "Index" fund, investing in the world stock market?

I am interpreting your question to mean that you are looking for global index funds available to US investors.

For true mutual funds, no single global index fund exists, to the best of my knowledge. However, you could go 50/50 or so with two Vanguard funds, VGTSX (Vanguard Total International Stock Fund) and VTSMX (Vanguard Total Stock Market Index Fund).

If you don't mind going with ETF's, you could go with 5% EEM (to cover emerging markets), 47% ISI (S&P 1500), 3% EWC (Canada) and 45% EFA, for non-US/Canada developed markets. For a more simple option, IOO is an ETF for the S&P Global 100 Index, thoough this would have a distinct large cap bias (i.e. does not represent the full market as much).

If your question was what IS an index fund, the answer is that is a fund that attempts to replicate the performance of an index. Such a fund tends to have a very low expense ratio relative to an active fund, and is also managed with much less turnover, which tends to be advantageous from a tax and trading cost perspective. Unlike what some of the other folks said below, they don't always hold everything in the index (they can use techniques like stratified sampling that let them avoid this).

Someone else below was saying index funds always underperform the index because of expenses - not true. The index managers use little tricks to add a bit of extra return to make up for expensives, like lending out their securities through prime brokers, etc. "Indexing" is more complicated than it sounds.

Good luck, hope this helps!!!

Your question does not make sense. Are you asking "What is an index fund?" or "Which index fund invests in the world stock market?" or both?

There are several available traded as etfs. Bought and sold like stocks. One that is close to global in nature is EFA--that is the symbol. It does not however hold any U S securities. 5 year annual return 16%.

http://www.etfconnect.com/select/fundpag...

PID is also one of a specialize nature. Invests in world companies that have a record of increasing their dividends. Again no U S stocks.

http://www.etfconnect.com/select/fundpag...
MFID=150188

DGT is perhaps closest to what you might be looking for maybe. Invests in the 50 largest companies in the world. 60% U S companies.

http://www.etfconnect.com/select/fundpag...

DOL and DOO are two others of similar nature.

Here is a list of all that might interest you.

http://www.etfconnect.com/select/FindAFu...

index fund simply means a fund that tracks an index such as the major indexes like the dow jones industrial average, or S&P500 there are index funds that track foreign indexes too. index funds are nice because they should not have high expense fees and will not underperform the market indexes since the track them many funds do underperform indexes

In spite of what the dude above me says, index tracking funds always under perform the index, because of expenses, but not by very much.

An Index fund invests in all the stocks listed in that particular index, for example, an S&P 500 index fund invests in all 500 stocks listed on the S&P 500.

The reason these are popular is that alot of people (correctly) believe that other mutual funds cannot outperform the index fund. Also, with other Mutual funds, you're paying the portfolio manager a fee to invest your money and to buy and sell stocks, however with an index fund, the stocks are already selected, so you save alot of money on sales fees (usu. between 2-5%)

An 'index' is a barometer of the most active and performing sectors in the economy. An index fund invests in the same ratio as the various stocks in the index.