Index Funds are said to exactly imitate a particular index in a given stock exchange. This index may be related to a particular sector, economy or fall in any other type of category. Index funds are made based on the old philosophy of marketing hypothesis. Marketing hypothesis says that the market situation at a particular time in any given stock market shows all the available information regarding the stocks or other securities of that particular stock market. This in theory is really too good to sound to ears, but in fact the theory has faced a lot of controversy on its soul concept that how can all the stock market incorporate in it and show from its current standing position all the information that it has been available with.

Index funds therefore according to their followers assume that as they imitate the perfect market where market reflects all the available information therefore they will do well and therefore investing in Index Funds is a really wise decision. This puts all the strain on the shoulders of the managers who are managing the index fund that they will incorporate all the information and perfectly imitate that in through the fund following a particular index. The investors then look for the optimum performance and expect a higher then market return on their investments. The followers of index fund also believe that as individual stock picking is extremely difficult it is better to follow the index and remain safe from the losses due to uncertain performances of these individual stock picks.

There is a long debate between the two different types of fan followings in stock investing. It is very hard to determine that the ones which just pick up stocks are better off or the ones which don’t do that hard work and just keep following the index they set as a benchmark to pursue. Among the other important factors playing their vital role in the extra ordinary profits, one key thing is the ability of the managers on both the sides who are managing the affairs.