What is an oil index fund?


Quick Answer

An Oil Index Fund is a type of mutual fund with a financial portfolio designed to track or simulate the elements of an oil market index, such as the S&P GSCI Brent Crude Index. Other popularly tracked indexes include the Russell 2000, the DJ Wilshire 5000 and the MSCI EAFE.

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Full Answer

Investors typically invest in index funds as a form of reliable, passive investing. Index funds offer a lower management expense ratio, and most other mutual funds fail to outperform general indexes, such as the Russell 2000. Financial specialists refer to these funds as passive because they do not rely on investment advice or financial managers to actively direct a portfolio. Instead, these funds simply replicate the behavior of much larger funds with a proven track record of success or stability. Basically, index funds just mirror the investment decisions forecast by the largest financial indexes, instead of relying on the advice of dedicated financial specialists.

Historically, the return on index funds remain relatively stable, consistently going down during a bear market and going up during a bull market. An average index fund possesses an expense ratio of about 0.20 percent, while an average non-index fund has an expense ratio of around 1.5 percent.

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