
Index funds mimic the movement of the index in which it follows. The index can follow the respective market by using two methods: (1) buying every stock in the index and weighting it appropriately, and (2) buy a select group of stocks which best represent the sector.
The first index fund was created by John Bogle of the Vanguard Group. Bogle came up with the idea that it would be better to create a fund which mirrored the larger market, because this approach overtime had shown to perform better than stock picking. Bogle's fund later became known as the Vanguard 500 Index Fund, with over 100 billion in assets.

Value funds are investment vehicles comprised of undervalued stocks which pay high dividends. Value funds are often a place investors flight to during an economic downturn. Value funds saw a large increase in investment dollars as a result of the 2008 credit crisis.
Value fund managers have the arduous task of identifying undervalued stocks in the market. This process is based on fundamental analysis techniques, where stocks with low price to earnings ratios are tagged. These stocks are then reviewed to see which ones have the greatest growth potential as well as paying high dividends.

Growth funds consist of stocks which pay little or no dividend but provide an above average annual return to investors. These stocks within the funds are considered growth stocks because the money made annually is directly reinvested into research and development for new products and services. A common feature of growth stocks is a high price to earnings ratio, as the stocks value are largely based on expected earnings.
