Somewhere around the time man discovered fire, he also learned one of the key rules of survival: "If you can't beat 'em, join 'em."

Not surprisingly, 2 million years later, some savvy investors rely on that advice in order to survive the primitive combat of the financial markets.

The best evidence of that advice at work is the invention of the index fund. An index fund is so named because its goal is to match the performance of a popular stock index.

It can be one of the Standard & Poor's stock indexes, such as the S&P 500, the S&P 400 or the S&P 100. Or it can be one of the indexes based on stocks drawn from the New York and American stock exchanges or from the over-the-counter market.

To match the performance of any of those indexes, an investment firm simply buys the same stocks listed by the indexes.

The S&P 500, for instance, is a collection of the nation's blue-chip stocks. The performance of S&P 500 stocks is often used as a yardstick by money managers to measure their own showing.

For years, professional investors have tried to put together portfolios that would outperform the market indexes or averages. Many still try. But less than half of the nation's money managers beat the averages.

So wisely, some investment professionals decided that if you can't beat the market, the next best thing is join it by becoming the market.

Thus, the index fund was born.

An investor who puts his money in an index fund won't do much better than the averages, but he can't do much worse.

That, at least, is the theory. How does it work in practice?

To get an answer to that question, we talked with Daniel S. Ryczek, who is the portfolio manager for the Rushmore Fund of Bethesda, which opened for business 21 months ago. Rushmore has five portfolios, including two stock index funds.

One is the Stock Market Index Plus, a $34 million fund that tries to mirror the movement of the S&P 100 index. The other is the Over-the-Counter (OTC) Index Plus, a $4.75 million fund that seeks to match the performance of the Nasdaq 100 industrials.

The Rushmore funds do not charge a commission, either to buy shares or redeem shares. The funds do not have a 12B-1 distribution or advertising charge. The management fee is a half of 1 percent and the expenses are a quarter of 1 percent.

Trying to match the performance of a specific stock index has some interesting wrinkles. For instance, Ryczek said, he owns all 100 of the OTC stocks, but only 80 of the S&P 100.

The reason, Ryczek said, is that the top 80 stocks in the S&P 100 list make up 97 percent of the value of the index, whereas the other 20 stocks represent only 3 percent. As a result, Ryczek said, it is not worth the cost to buy those shares for the fund.

In the S&P 100, each stock is weighted by the company's market value -- the price of the company's shares multiplied by the number of shares. The result is that each stock influences the index in proportion to its significance in the stock market.

Among the S&P 100's top stocks are IBM, which holds 10.3 percent of the index, while Exxon has 6.5 percent, General Electric has 5.25 percent, AT&T has 3.33 percent and General Motors has 3 percent.

The Nasdaq 100, also a weighted index, includes Intel, Apple Computer, Genentech, Microsoft and Liz Claiborne. However, Ryczek said, since most of the stocks are relatively small, he must hold all 100 issues.

The two funds draw different kinds of investors, Ryczek said. Investors who go into the S&P 100 fund "believe the blue chips are the place to be" while investors in the Nasdaq 100 fund "think the Nasdaq stocks are undervalued and believe they will outperform the blue chips in the long run."

Ryczek's results, tabulated from Dec. 16, 1985, to Aug. 11, 1987, were as follows:

The Rushmore S&P 100 fund rose 59.14 percent compared with 59.46 percent for the actual S&P 100 index.

The S&P 100 index was, in turn, slightly ahead of the S&P 500 index, which rose 57.78 percent. Both lagged the 30 stocks in the Dow Jones industrial average, which rose 73.35 percent. The figures do not include dividends.

Ryczek's performance with the Nasdaq 100 fund was not quite as precise as with the S&P fund. The Rushmore Nasdaq fund went up 52.84 percent, while the actual Nasdaq 100 index rose 57.51 percent. The gap, said Ryczek, was caused by problems involving call options.

Because Ryczek's primary goal is to match the averages, he tries to stay fully invested. But the fund needs cash for redemptions, and money is always coming in and going out.

Often, late in the day, just before the market closes, several million dollars will arrive from some major investor.

Ryczek's strategy is to quickly buy call options on the S&P 100 index. The price of the calls will then move in tandem with the price of the S&P 100 stocks. By buying the calls, Ryczek is able to mirror what would have happened to the cash if there had been time to convert the cash into shares of stock.

Unfortunately, there are no index options on the Nasdaq 100, so Ryczek has used the S&P 100 options as a proxy. But the correlation is not quite as close, which accounts for the almost 5 percent gap between the Nasdaq fund and its index, Ryczek said.

Ryczek has been able to compare the movement of the S&P 100 stocks and the Nasdaq 100 stocks. The over-the-counter group tends to lead the market, he said, moving up faster than the S&P stocks when the market is headed up and falling faster than the S&P shares when the market is headed down.

"It helps me predict the turns in the market," he said.

After almost two years of working with the two index funds, Ryczek is convinced that the index approach is the right one.

"I think that performance that is average is performance that is superior because average performance is so hard to achieve," he said.

The bull market is five years old and a lot of investors probably wish they had bought stock in Circuit City Stores of Richmond. Since 1982, the shares of the electronics retailer have moved up an astonishing 3,336.3 percent. Circuit City has had seven consecutive years of sales gains that have taken the company over the $1 billion level. Analysts at Wheat, First Securities say the company's growth is being fueled by a variety of factors, including "favorable consumer demographics, continued industry growth, a lower corporate tax rate and strong company fundamentals, including an aggressive, well-managed expansion plan."

Hechinger Co. has called for early redemption of $83.7 million worth of 8.5 percent convertible debentures. Investors will have two options, one more lucrative than the other. The investors can accept $1,115.86 in cash, which includes accrued interest, for each $1,000 debenture. Or they can convert each debenture into 66.49 shares of Class A common stock. Hechinger Class A shares closed Thursday night at $26.50, making the 66.49 shares worth a total of $1,761.99.

Thus, the stock package is worth about 58 percent more than the cash package. Investors have until Sept. 14 to convert to stock.

Investors who decide to convert to stock will receive accrued interest on the debentures from March 15 to Sept. 14. Technically speaking, said Chief Financial Officer W. Clark McClelland, the company is not required to pay the accrued interest in a stock conversion situation but has decided, in the interest of fair play, to spend the $3.5 million involved and pay the interest. That should please the investment community.

McClelland said that calling in the debentures will strengthen the company's balance sheet and help it lower its interest costs. The company recently did a $132 million, 5.5 percent debenture.