Which investment strategy is often described as minimizing expenses while tracking a market index?

Index investing is a strategy designed specifically to minimize expenses while closely tracking the performance of a market index. This approach typically involves purchasing a diversified portfolio of securities that mirror the composition of a specific index, such as the S&P 500. The underlying philosophy is that rather than trying to outperform the market through active selection of stocks, investors can achieve similar returns with significantly lower fees by simply matching the index.

The cost efficiency stems from the passive nature of the strategy, which requires fewer trades and less research compared to actively managed portfolios. This makes index funds and exchange-traded funds (ETFs) particularly appealing to cost-conscious investors. By aligning the investment's performance with that of the market index, index investing aims to deliver market returns with minimal management expenses and lower turnover rates, which contribute to reduced tax liabilities.

In contrast, active management involves a strategy where portfolio managers make specific investment choices with the aim of outperforming a benchmark index, which often results in higher fees and expenses. Growth and value investing are individual stock-picking strategies focusing on different characteristics of stocks but do not aim to minimize expenses in a way that tracking an index does.