Index funds track a market index like the S&P 500 at extremely low cost. The best index funds consistently beat the majority of actively managed funds over time, making them the preferred choice for both beginner and experienced investors. When you buy an index fund, you are betting on the entire market rather than picking individual winners. This strategy has proven to outperform most professional money managers over the long term.
Best Total US Stock: VTI
VTI, the Vanguard Total Stock Market ETF, tracks the entire US stock market with an expense ratio of just 0.03%. It includes large-cap, mid-cap, and small-cap stocks in a single fund with a $1 minimum. VTI is widely regarded as one of the best index funds for core portfolio holdings.
Best S&P 500: VOO
VOO, the Vanguard S&P 500 ETF, tracks the 500 largest US companies with a 0.03% expense ratio. It offers concentrated exposure to the most established American businesses and has delivered an average annual return of approximately 10% historically. VOO is one of the most popular best index funds for good reason.
Best Total International: VXUS
VXUS, the Vanguard Total International Stock ETF, provides exposure to non-US markets with a 0.07% expense ratio. International diversification reduces portfolio volatility and captures growth in overseas economies. Including VXUS alongside US funds creates a truly global portfolio of the best index funds.
Best Total Bond: BND
BND, the Vanguard Total Bond Market ETF, offers diversified exposure to US investment-grade bonds with a 0.03% expense ratio. Bonds provide stability and income, acting as a portfolio anchor during stock market downturns. BND is a core holding among the best index funds for balanced portfolios.
Best for Fidelity: FSKAX
FSKAX, the Fidelity Total Market Index Fund, charges an ultra-low expense ratio of just 0.015% with a $0 minimum investment. Fidelity customers consider it one of the best index funds available because of its microscopic fee structure and comprehensive US market coverage.
Best for Schwab: SWTSX
SWTSX, the Schwab Total Stock Market Index Fund, comes in at 0.03% with no minimum investment. Schwab clients benefit from this low-cost total market fund that mirrors the performance of the broader US stock market. It is easily one of the best index funds on the Schwab platform.
Comparison Table
| Index Fund | Asset Class | Expense Ratio | Minimum | Provider |
|---|---|---|---|---|
| VTI | Total US Stock | 0.03% | $1 | Vanguard |
| VOO | S&P 500 | 0.03% | $1 | Vanguard |
| VXUS | Total International | 0.07% | $1 | Vanguard |
| BND | Total Bond | 0.03% | $1 | Vanguard |
| FSKAX | Total US Stock | 0.015% | $0 | Fidelity |
| SWTSX | Total US Stock | 0.03% | $0 | Schwab |
ETF vs Mutual Fund
ETFs trade throughout the day like stocks, while mutual funds trade once per day after market close. ETFs are generally more tax-efficient due to their unique creation and redemption process. Both achieve the same investment results. The best index funds are available in both formats, so choose based on your trading preferences and broker.
Why Low Fees Matter
Consider a 1% fee versus a 0.03% fee on a $100,000 portfolio over 30 years at an 8% return. The 1% fee costs you approximately $105,000 in lost growth. The best index funds charge 0.03-0.10%, keeping nearly all of your returns working for you. Lower fees mean more money in your pocket at retirement.
Building a Simple Portfolio
A simple 3-fund portfolio using the best index funds for moderate risk is: 60% VTI (US stocks), 20% VXUS (international stocks), and 20% BND (bonds). Adjust the bond allocation up as you approach retirement. This combination has historically delivered strong returns with reduced volatility.
Disclaimer: Rates and terms are subject to change. This content is for informational purposes only and does not constitute financial advice. Always verify current rates directly with the financial institution. Aurwallet is not affiliated with any of the products mentioned.