Question

How, or would, you incorporate index funds (via mutual funds or ETF's) into your investment strategy? (ie, funds that mimic a market or sector index) Why?

Answer 1

One can invest in index funds through investment in mutual funds or exchange traded funds (ETFs) which are passively managed fund based on some index. Both Mutual Funds and ETFs are good for long term investment strategy, selection of any depends on investors preferences, investment amount tax implications etc.

In the case of mutual funds; portfolio manager of such funds simply try to replicate the index and section of stocks and their weighted are based on selected index. Expense ratio is generally lower for index funds as not much active involvement of portfolio managers are required. The investors expect return equal to the index from an index fund and believe that no one can outperform the market in long run.  

The exchange traded funds (ETFs) have the lower expense ratio in comparison of mutual funds. Trading can be done throughout the day for Exchange traded funds but mutual funds are traded only end of the trading day.