[python] Python error: "IndexError: string index out of range"

It looks like you indented so_far = new too much. Try this:

if guess in word:
    print("\nYes!", guess, "is in the word!")

    # Create a new variable (so_far) to contain the guess
    new = ""
    i = 0
    for i in range(len(word)):
        if guess == word[i]:
            new += guess
        else:
            new += so_far[i]
    so_far = new # unindented this