Final answer:
An index fund targets stocks listed in major stock indexes, such as the S&P 500, aiming to mirror the index's performance and provides diversification to mitigate investment risk.
Step-by-step explanation:
The mutual fund that targets stocks listed in the major stock indexes is known as an index fund. These funds aim to replicate the performance of a specific index, such as the Standard & Poor's 500 or the NASDAQ.
Index funds achieve this by holding a portfolio of stocks that represent the index. By doing so, they provide broad market exposure and diversification, which can help mitigate risk. However, as with any investment, there are risks involved, and the value of the fund will fluctuate with the market. Investors, especially those approaching retirement, must be prepared for such volatility, as seen in 2008 when average U.S. stock funds saw a significant decline.