Looking for great investments? Look no further than index funds. Index funds are some of the best assets out there. They are low cost, take less research time, and match the market. Investing can be as easy as picking just one of the best index funds and continuing to buy more shares.
In high volatility, it is best to invest in index funds as some stocks will stay up, some will fall, and your portfolio will lose less. The best index funds are those with the lowest cost that closely matches an index.
What is an Index Fund?
An Index fund is a type of mutual fund that tracks or mirrors a particular index. So an index is like the S&P 500 or the Nasdaq 100. These are two popular indexes on the U.S. market. The Dow Jones Industrial Average is another popular index that many economists and investors follow to see how the market is trending.
The great thing about index funds is that they are low costs and less stressful. No longer will you need to research each company; you can pick an index fund and be set. It makes investing quite simple.
Index funds come in all sizes and shapes. Many companies create some of the best index funds, like Vanguard, Fidelity, Blackrock, Schwab, and Investco. These index funds can be either an Exchange Traded Fund (ETF) or a mutual fund. So there are many options to choose from.
Having the option to choose a low-cost index fund can make it hard where to look. Luckily for you, here is a list of some of the best index funds. All you have to do is choose one or two, and you can be set to have a simple portfolio.
The 9 Best Index Funds
Examining index funds can be confusing on which one to choose. Here is a list of 9 of the best, as you may be able to tell some of these track similar indexes. You can then pick a brokerage company you would like to do business with and choose their index funds. Both Vanguard and Fidelity index funds do an excellent job for their investors.
Vanguard Total Stock Market Index Fund (VTSAX)
VTSAX is one of the best index funds out there. It has a low expense ratio of 0.04%, which will cost you $4 for every $10,000 you have invested. VTSAX has a minimum investment of $3,000, but with the diversification of 4,000 different companies, it is one of the best index funds. VTSAX can be often compared to FZROX as two of the best total market index funds.
If you want a much cheaper fund version, you can always use VTI, the ETF version. The expense ratio is 0.03%. ETFs can be traded throughout the day like a stock.
Vanguard 500 Index Fund (VFIAX)
The Vanguard 500 index fund is the very first index fund ever created. VFIAX is the admiral shares version, which you can buy with a minimum investment of $3,000. The Vanguard 500 Index Fund mirrors the S&P 500, exposing you to the top 500 companies in the U.S.
It is considered one of the best index funds to invest in. As many people invest with this fund, they also invest in the popular ETF version called VOO.
Fidelity Large Cap Zero Fund (FNILX)
Fidelity has created a couple of zero-fee funds that help gain an advantage in the index fund market. The Fidelity Large Cap Zero Fund is one of these funds. It tracks the S&P 500 index without using the name of the S&P 500. With a 0% expense ratio, it is the cheapest large-cap index fund. Matching the results of the S&P 500 and costing 0% is one of the best things about this fund.
Vanguard Real Estate Index Fund ETF (VNQ)
If getting into real estate is something you would like to dive into, then VNQ would be a great ETF. It is invested in the REITs that buy real estate like office buildings, malls, retirement homes, etc. It tracks the MSCI US Investable Market Real Estate 25/50 Index. Through VNQ, you can have a piece of some of the best REITs and real estate on the market without becoming a landlord.
Vanguard International Index Fund (VXUS)
The VXUS ETF is an index investing ETF that tracks the FTSE Global All Capitalization ex-US Index, comprising over 7,800 companies across 46 countries. It has a 75% exposure to the developed market like Japan, the U.K., China, and Canada, and a 25% exposure to the emerging markets. VXUS is giving index investors a huge diversification fund to their portfolio, capturing the international sector with many other companies that dominate the world.
Investco QQQ Trust (QQQ)
QQQ tracks the Nasdaq 100, exposing the top 100 tech companies in the U.S. It is regarded as one of the most popular ETFs, with a high liquidity factor for those into trading options. It offers many people the necessary exposure to a different sector that concentrates on technology and innovation. It has an expense ratio of 0.20%.
Related: VGT vs QQQ: What is the Best Tech ETF?
Schwab US Dividend Equity ETF (SCHD)
If you are into dividend stocks but want an index investing fund that helps with market volatility, then the Schwab US Dividend Equity ETF is great. It tracks the Dow Jones US Dividend 100 Index, which features 100 companies paying dividends consecutively for the last ten years. It features companies like Pepsico(PEP) and Pfizer (PFE).
SCHD has a modified approach to how companies are weighted. The companies are weighted by market cap, but it limits each stock to a max of 4% and each sector to 25% of the fund's distribution. These measures help this fund stay more diversified without letting certain stocks become overweight.
If you are looking for a good dividend growth ETF, then SCHD could be one of the best ones you could own in your portfolio.
Related: SCHD vs VYM: Which is the Better Dividend ETF?
Schwab S&P 500 Index Fund (SWPPX)
The Schwab S&P 500 Index Fund (SWPPX) represents another excellent index fund that mirrors the S&P 500. It has a low expense ratio of 0.02%, making that only $2 for every $10,000 invested. The fund is quite similar to both of the S&P 500 funds offered by Vanguard and Fidelity. It is ranked as one of the best index funds out there.
Schwab Total Market Index Fund (SWTSX)
If you are looking for another option for a total market index fund, look no further than the Schwab Total Market Index Fund (SWTSX). It has a lower expense ratio than VTSAX, at the cost of 0.03%, but you can quickly get that same expense ratio with VTI, the ETF of VTSAX. The great thing about this fund is that it does not take a certain amount of money to start. If you have $10, you can begin investing. With VTSAX, you must start with $3,000. With the ETF, VTI, you must have enough to buy one share.
If you are looking for alternatives to your other popular index funds, then look at some of the Schwab funds.
Index funds offer investors options. People try to strategize and outperform the market all the time. It is not easy to pick winners. As bear markets happen, stocks tend to go down while index funds do not lose everything. If your index funds go to zero, there are more significant issues besides the fund itself. The world may be in turmoil.
Taking an approach of the simple, low-cost index fund wins can make you quite a bit of money. There will be less stress, less research, and lower fees. These nine best index funds can help you make a long-term investment strategy to fit so many of your needs. Take a look, pick a few, and continue to invest for the long term.
I’m Steve. I’m an English Teacher, traveler, and an avid outdoorsman. If you’d like to comment, ask a question, or simply say hi, leave me a message here, on Twitter (@thefrugalexpat1). Many of my posts have been written to help those in their journey to financial independence. I am on my journey, and as I learn more I hope to share more. And as always, thanks for reading The Frugal Expat.