Stocks, mutual funds, index funds...what do they all mean? If you're a beginner or conservative investor, index funds might be just right for you. They give you the diversity of mutual funds, but cost less, and you don't have to be an expert to figure out how they work. Index funds are designed for a specific market or sector, making them much easier to understand.

Some of the common index fund types center around the S&P 500, the entire stock market, various cap funds, companies, and more. So, you can put your money into the areas of the market that interest you the most, just the way you would with regular mutual funds or a stock portfolio.

You won't get some of the huge increases in profit you may with the stock market, but you won't see the terrifying drops, either. Index funds will give you average returns. Some of the most popular index funds belong to Vanguard and T. Rowe Price; they are consistently solid and their expense ratio is very low.

An index fund is a type of mutual fund trust. It has an unlimited number of units, and it's not traded on a stock exchange. Therefore, the net asset value is calculated only once a day. If you want a type of fund that's more similar to the stock market, an exchange-traded fund may be an option for you.

If you choose to buy index funds, you can easily get them from your local bank, online or by phone. Banks will sell you index funds on a no-load basis, meaning that there are no commissions to buy and sell. This makes index funds more cost-effective than many other types of investments. If you opt for exchange traded funds, you'll also need a brokerage account, which makes them less accessible and desirable to most people. Another benefit of index funds is that you can choose the amount you want to invest weekly, biweekly or monthly.