Index Funds

Designed to mirror the performance of the market indices.

What are Index Funds?

We lead extremely busy lives. Some of us simply don't have the time to play an active role in our investments. If you're looking for a passive investment strategy with low fees, index funds can be a good option. They're designed to track and perform like market indices. Index funds purchase securities that make up a market index. These funds attempt to match the market instead of trying to beat it.

Key Highlights

  • Lower MERs than actively managed funds

    Passively managed index funds have lower management expense ratios (MERs). This may help you minimize investment costs.

  • No commission to buy and sell

    You are not charged any commissions for buying or selling index mutual funds.

  • Broad market exposure

    You can pick funds that track small, mid-sized or large companies. You can also choose funds that focus on certain sectors.

Index Funds vs Actively Managed Funds vs ETF

Explore the differences between fund types.

Index Fund (Passively Managed)

Actively Managed Fund

Actively Managed Exchange Traded Fund (ETF)


Track the performance of market indices to yield market-average returns

A pool of pre-selected securities that seek to outperform the market

A collection of securities that trade on a stock exchange


Lower expense ratio

Higher expense ratio

Lower expense ratio


Requires a fund manager

Requires a fund manager

Requires a fund manager


They may have management fees

They have both transaction and management fees

They have both transaction and management fees

Index Fund FAQs

Yes. TD Direct Investing gives you access to a wide variety of investment asset classes including index funds, mutual funds, ETFs, stocks and more. Commissions and fees apply depending on what you trade and your minimum account balance1. All you need is a self-directed investment account.

For some investors, index funds may be a low-cost way to spread their investment dollars across many different investments. They have a lower MER compared to non-index ETFs and mutual funds.

The stock market can be volatile and unpredictable at times. However, most market indices tend to rise in value over time. As index funds mirror the performance of market indices, while not guaranteed, they may be considered by some to be stable investments over the long term.

Index ETFs have no minimum, and you can buy as little as one share. Make sure to consider your capacity for risk before investing.

Explore other investment types

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