Best Index Funds: Where To Invest Your Money

Index funds are a great investment for building wealth over the long term. They are a group of stocks that mirror the performance of an existing stock market index, such as the Standard & Poor's 500 index.

- Vanguard S&P 500 ETF

- Vanguard High Dividend Yield ETF

- Vanguard Real Estate ETF

- iShares Core S&P Total U.S. Stock Market ETF

- Consumer Staples Select Sector SPDR Fund

- iShares 0-3 Month Treasury Bond ETF

- Vanguard Utilities ETF

- iShares U.S. Healthcare Providers ETF

- Schwab U.S. TIPS ETF

- Fidelity 500 Index Fund

- Vanguard 500 Index Fund Admiral Shares

- Schwab S&P 500 Index Fund

Vanguard S&P 500 ETF

The Vanguard S&P 500 ETF (VOO) is one of the largest exchange-traded funds (ETFs) on the market, with hundreds of billions in the fund. This ETF began trading in 2010 and is backed by Vanguard, a powerhouse in the fund industry.

The Vanguard S&P 500 ETF has an expense ratio of 0.03%, which means that for every $10,000 invested, you would pay $3 annually. This is an extremely low expense ratio, making it a good choice for investors looking for a low-cost, broadly diversified index fund to serve as a core holding in their portfolio.

The fund has a strong 5-year annualized return of 16.0%, which is in line with the S&P 500's long-term record of about 10% annual returns. This fund is a good option for investors who want to benefit from the overall growth of the economy and are willing to take on some risk in pursuit of higher rewards.

The Vanguard S&P 500 ETF can be purchased directly from the fund company or through most online brokers. It is important to note that, like any investment, there is some risk involved, and past performance does not guarantee future results. However, the Vanguard S&P 500 ETF is a well-diversified and established fund that has delivered solid returns, making it one of the top index funds to consider for your investment portfolio.

Fidelity ZERO Large Cap Index

The Fidelity ZERO Large Cap Index Fund is one of the best index funds tracking the S&P 500. It is part of Fidelity's foray into mutual funds with no expense ratio, hence the ZERO moniker. The fund tracks the Fidelity U.S. Large Cap Index instead of the S&P 500, allowing it to avoid paying a licensing fee to use the S&P name, thereby keeping costs lower for investors.

The fund has no official minimum investment amount, making it a good choice for beginning investors. It also has a 0% expense ratio, meaning that every $10,000 invested would cost $0 annually. Its 5-year annualized return is 16.0%, and it is suitable for investors looking for a broadly diversified index fund at a low cost to serve as a core holding in their portfolio. The fund can be purchased directly from the fund company or through most online brokers.

The fund's performance closely mirrors that of the S&P 500. As of mid-May 2024, it was up by about 12%, almost identical to the S&P 500 index's year-to-date gains. The fund's top holdings include Meta Platforms Inc Class A, Alphabet Inc Class A, and Berkshire Hathaway Inc Class B.

Vanguard Russell 2000 ETF

The Vanguard Russell 2000 ETF (VTWO) is an exchange-traded fund (ETF) that tracks the Russell 2000 Index, which is made up of around 2,000 of the smallest publicly traded companies in the US. The fund began trading in 2010 and, as a Vanguard fund, prioritises keeping costs low for investors.

The Vanguard Russell 2000 ETF had around 1,960 holdings as of 31 December 2023, with its largest concentrations in industrials (19.3%), financials (15%), and healthcare (14.8%). Its expense ratio is 0.10%, meaning that for every $10,000 invested, $10 would be paid annually. This is considered a relatively low expense ratio, especially for a fund offering exposure to companies with significant growth potential.

The fund can be purchased directly from the Vanguard company or through most online brokers. As of 30 September 2024, the fund's 5-year annualized return was 9.4%.

Vanguard Total Stock Market ETF

The Vanguard Total Stock Market ETF is a fund that covers the entire universe of publicly traded stocks in the U.S. It consists of small, medium, and large companies across all sectors. The fund began trading in 2001 and is backed by Vanguard, a powerhouse in the fund industry known for its focus on keeping costs low for investors.

The expense ratio for the Vanguard Total Stock Market ETF is 0.03%, which means that for every $10,000 invested, you would pay $3 annually. This is an extremely low expense ratio, making it a good choice for investors looking for a low-cost fund. The fund's 5-year annualized return as of September 30, 2024, was 15.2%, which is solid but lower than some other funds on the market.

The Vanguard Total Stock Market ETF can be purchased directly from the fund company or through most online brokers. It is important to note that, like all stocks, the fund will fluctuate in value over time. However, it offers immediate diversification, as it provides exposure to a wide range of companies across different sectors and market capitalizations. This makes it a good choice for investors looking for a broadly diversified, low-cost fund to serve as a core holding in their portfolio.

As with any investment, there are some risks and considerations to keep in mind. While index funds are generally considered safer than individual stocks due to diversification, they can still underperform and lose money for years. Additionally, it is important to consider the fund's long-run performance and expense ratio when making investment decisions.

SPDR Dow Jones Industrial Average ETF Trust

The SPDR Dow Jones Industrial Average ETF Trust is an exchange-traded fund (ETF) that aims to provide investment results that correspond with the price and yield performance of the Dow Jones Industrial Average (DJIA). The DJIA is a stock market index composed of 30 "blue-chip" U.S. stocks and is the oldest continuing U.S. market index, dating back over 100 years. As such, it is considered a barometer of the U.S. stock market and the most widely quoted indicator of U.S. stock market activity.

The SPDR Dow Jones Industrial Average ETF Trust seeks to replicate the performance of the DJIA by holding a range of securities that approximate the full index in terms of key risk factors and other characteristics. The fund has a gross expense ratio of 0.16%, which means that for every $10,000 invested, investors can expect to pay $16 in annual fees. This expense ratio is relatively low compared to other funds, making it a cost-effective option for investors.

In terms of performance, the SPDR Dow Jones Industrial Average ETF Trust has delivered a 5-year annualized return of 11.7%. This return is lower than some other index funds but still offers investors a solid return on their investment. The fund has a diverse range of holdings, with its top holdings as of October 20, 2024, including UnitedHealth Group Inc, Goldman Sachs Group Inc, and Visa Inc Class A Shares.

One benefit of investing in the SPDR Dow Jones Industrial Average ETF Trust is the diversification it offers. By tracking the DJIA, the fund provides exposure to a range of large-cap U.S. companies across different sectors. This diversification can help reduce the risk associated with investing in individual stocks, as investors' fortunes are not tied to the outcome of a single company.

Overall, the SPDR Dow Jones Industrial Average ETF Trust is a solid choice for investors looking for exposure to blue-chip U.S. companies and the performance of the DJIA. With its low expense ratio and diverse holdings, it offers a cost-effective and relatively low-risk investment option. However, as with any investment, there are risks involved, and investors should carefully consider their financial goals and risk tolerance before investing.

Frequently asked questions