What do they call an Index fund and what is equity fund?

Answer 1

An index fund is a mutual fund that holds all the stocks in a particular index and no others. For example, an index fund tracking the S&P 500 (a popular one) holds all the stocks listed in the S&P 500 index--basically the largest 500 companies. The fund makes no effort to determine what stocks are better or worse, but in return, charges a lower expense ratio (sometimes much, much lower).

In contrast, an actively managed fund tries to buy the stocks they think will perform better, and avoid the others. They often try to outperform a particular index. In exchange for this expert help, they charge a higher expense ratio than index funds. Studies have shown, however, that the active funds don't usually do any better than the index funds, and often do worse.

An equity fund is a mutual fund, either index or active, that invests in stocks (as opposed to bonds, Treasury notes, etc.)