What do index funds typically aim to track?

Index funds primarily aim to track the performance of a specific market index, such as the S&P 500 or the Dow Jones Industrial Average. These funds are designed to replicate the movements of the selected index by investing in the same stocks that comprise that index, typically in the same proportions. This passive investment strategy allows investors to gain exposure to a diverse range of securities without the need for active management.

By tracking a market index, index funds offer investors a way to invest in the broader market's performance, which tends to yield returns consistent with overall market trends over time. This approach contrasts with actively managed funds, where fund managers select individual stocks with the goal of outperforming the market.

Other options do not describe the primary goal of index funds. Individual stocks are part of many investment strategies but are not the focus of index funds. Interest rates set by banks relate to fixed-income investments and monetary policy, rather than the scope of index funds. Economic growth is a macroeconomic indicator that may influence investments but is not what index funds aim to track directly.