Enhanced Index Fund - EIF


DEFINITION of 'Enhanced Index Fund - EIF'

A mutual fund that tracks a stock market index, but with certain modifications in place to allow for more equivalent position sizes, the exclusion of certain securities, or the use of leverage, all with the goal of beating the return of the tracking index. These types of funds are actively managed, and will often use the S&P 500 Index as the tracking index.

BREAKING DOWN 'Enhanced Index Fund - EIF'

Enhanced index funds trade with the "index fund" title, but to be fair, that's where the similarity usually ends. True index funds have consistently lower fees, lower turnover and passive management. Enhanced index funds, on the other hand, are actively managed to beat the return of the tracking index. This approach causes relatively higher fees and turnover than the traditional index fund. While proponents of enhanced index funds cite better total return performance as a plus for this type of fund, investors need to be aware that using leverage and active management also increases risk, at least as compared to a conventional index fund.

  1. Leverage

    1. The use of various financial instruments or borrowed capital, ...
  2. Passive Management

    A style of management associated with mutual and exchange-traded ...
  3. Expense Ratio

    A measure of what it costs an investment company to operate a ...
  4. Active Management

    The use of a human element, such as a single manager, co-managers ...
  5. Index Fund

    An index fund is a type of mutual fund with a portfolio constructed ...
  6. Standard & Poor's 500 Index - S&P ...

    An index of 500 stocks chosen for market size, liquidity and ...
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