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.

RELATED TERMS
  1. Index Fund

    An index fund is a type of mutual fund with a portfolio constructed ...
  2. Index Investing

    A form of passive investing that aims to generate the same rate ...
  3. Tracker Fund

    An index fund that tracks a broad market index or a segment thereof. ...
  4. Active Index Fund

    A type of index fund where a fund manager bases the fund's initial ...
  5. Index Hugger

    A managed mutual fund that tends to perform much like a benchmark ...
  6. Bear Fund

    A mutual fund designed to provide higher returns when the market ...
Related Articles
  1. ETFs & Mutual Funds

    Enhanced Index Funds: Can They Deliver Low-Risk Returns?

    These funds may look appealing. Find out whether they can really live up to all of their promises.
  2. ETFs & Mutual Funds

    ETF Tracking Errors: Protect Your Returns

    Tracking errors tend to be small, but they can still adversely affect your returns. Learn how to protect against them.
  3. ETFs & Mutual Funds

    The Hidden Differences Between Index Funds

    These funds don't all match index returns. Find out how to avoid costly surprises.
  4. ETFs & Mutual Funds

    The Lowdown On Index Funds

    If you can't beat the market, why not join it? Read on to go over your options.
  5. ETFs & Mutual Funds

    What are Index Funds?

    An index fund is a type of mutual fund that is tied to a broad stock index like the S&P 500 or the Dow Jones Industrial Average, instead of being handpicked and managed by an investment manager. ...
  6. Managing Wealth

    3 Index Funds with the Lowest Expense Ratios

    Read detailed information about index mutual funds with some of the lowest expense ratios in their categories, and learn about their pros and cons.
  7. ETFs & Mutual Funds

    The 4 Best U.S. Equity Index Mutual Funds

    Find out which four index mutual funds are among the best U.S. equities index mutual funds for core holdings in your investment portfolio.
  8. ETFs & Mutual Funds

    The Pros and Cons of Indexes

    Learn about the advantages and disadvantages of stock indexes and passive index funds. Discover how there is an opportunity cost to using index funds.
  9. ETFs & Mutual Funds

    How Vanguard Index Funds Work

    Learn how Vanguard index funds work. See how the index sampling technique allows Vanguard to charge low expense ratios that can save investors money.
  10. Financial Advisor

    Should Investors Nix Actively Managed Funds?

    Index fund returns are on a tear but does this mean investors should nix actively managed funds?
RELATED FAQS
  1. Why do index funds tend to have low expense ratios?

    Understand what an index fund is and why the nature of index funds causes them to have lower expense ratios than more actively ... Read Answer >>
  2. How can I calculate the tracking error of an ETF or indexed mutual fund?

    Understand what tracking error is and learn about the significant difference it can represent for investors who favor index ... Read Answer >>
  3. Is it possible to invest in an index?

    First, let's review the definition of an index. An index is essentially an imaginary portfolio of securities representing ... Read Answer >>
  4. Which mutual funds have the lowest fees?

    Discover why index mutual funds are generally less expensive than actively managed funds and learn about three of the lowest-cost ... Read Answer >>
  5. What is an appropriate large cap mutual fund fee?

    Discover what an appropriate fee for a large-cap mutual fund should be, and learn how choosing index mutual funds can lead ... Read Answer >>
  6. What's the difference between an index fund and an ETF?

    Learn about the difference between an index fund and an exchange-traded fund and how index fund investing compares to value ... Read Answer >>
Hot Definitions
  1. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  2. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  3. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  4. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  5. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
  6. Weighted Average Life - WAL

    The average number of years for which each dollar of unpaid principal on a loan or mortgage remains outstanding. Once calculated, ...
Trading Center