A type of ETF (exchange-traded fund) that is set up to replicate the performance or movement of an underlying index or benchmark. For example, an index-based ETF may be designed to track the performance of S&P 500. In reality, the fund is composed to track the underlying performance as closely as possible.

An index-based ETF seeks to earn the return of the market or subset of the market that it aims to replicate, less the fees involved. For that purpose, the fund consists of a basket of stocks and or/ other securities that reflects the composition of the selected index.

It is also known as an index ETF or an index-tracking ETF.