In the context of IUL, "index" refers to a collection of equities that are traded in units or shares. The most common index is the S&P 500, which represents 500 of the largest and highest rated companies in the United States as determined by Standard & Poors. Other U. S. indices include The Dow Jones Industrial Average, The Russell 2000, the NASDAQ, and even bonds and precious metals, International indices include the Hang Seng, Eurostoxx 50, and the BRIC (comprised of the stocks of Brazil, Russia, India, and China).
Since an index is not actively managed group of stocks, the fees associated with these instruments are usually lower than for managed mutual funds.
Electronically Traded Funds are a type of index fund that consist of specially selected securities that represent certain sectors of the marketplace. An ETF of the home building industry would be an example. (Back to IUL Table of Contents)