Index funds are a type of mutual fund or exchange-traded fund (ETF) that track a specific market index, such as the S&P 500 or the Dow Jones Industrial Average. This means that when you invest in an index fund, you are essentially investing in a basket of stocks that make up that index.
Index funds are a popular choice for investors because they are relatively low-cost and easy to invest in. They also offer a diversified way to invest in the stock market, which can help to reduce your risk.
The 16 Popular Low Cost Index Funds
1. Fidelity ZERO Total Market Index Fund (FZROX)
The Fidelity ZERO Total Market Index Fund is a zero-expense ratio index fund that tracks the Wilshire 5000 Total Market Index. This index includes all publicly traded stocks in the United States, regardless of their size or market capitalization.
2. Schwab Total Stock Market Index Fund (SWTSX)
The Schwab Total Stock Market Index Fund is a low-cost index fund that tracks the Dow Jones U.S. Total Stock Market Index. This index includes all publicly traded stocks in the United States, as well as real estate investment trusts (REITs).
3. SPDR S&P 500 ETF Trust (SPY)
The SPDR S&P 500 ETF Trust is a popular ETF that tracks the S&P 500 index. The S&P 500 is a stock market index that tracks the 500 largest publicly traded companies in the United States.
4. Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)
The Vanguard Total Stock Market Index Fund Admiral Shares is a low-cost index fund that tracks the CRSP U.S. Total Market Index. This index includes all publicly traded stocks in the United States, as well as REITs.
5. iShares Core S&P 500 ETF (IVV)
The iShares Core S&P 500 ETF is a low-cost ETF that tracks the S&P 500 index.
6. Vanguard S&P 500 ETF (VOO)
The Vanguard S&P 500 ETF is a low-cost ETF that tracks the S&P 500 index.
7. Fidelity 500 Index Fund (FXAIX)
The Fidelity 500 Index Fund is a low-cost index fund that tracks the S&P 500 index.
8. Schwab S&P 500 Index Fund (SWPPX)
The Schwab S&P 500 Index Fund is a low-cost index fund that tracks the S&P 500 index.
9. iShares Core S&P Total US Stock Market ETF (ITOT)
The iShares Core S&P Total US Stock Market ETF is a low-cost ETF that tracks the S&P Total Market Index. This index includes all publicly traded stocks in the United States, as well as REITs.
10. Vanguard Total World Stock Index Fund Admiral Shares (VTWAX)
The Vanguard Total World Stock Index Fund Admiral Shares is a low-cost index fund that tracks the FTSE Global All Cap Index. This index includes all publicly traded stocks in the world, regardless of their size or market capitalization.
11. iShares Core MSCI Total World Stock Market ETF (VT)
The iShares Core MSCI Total World Stock Market ETF is a low-cost ETF that tracks the MSCI All Country World Index. This index includes all publicly traded stocks in the world, regardless of their size or market capitalization.
12. Vanguard Total International Stock Index Fund Admiral Shares (VTIAX)
The Vanguard Total International Stock Index Fund Admiral Shares is a low-cost index fund that tracks the FTSE Developed All Cap ex US Index. This index includes all publicly traded stocks outside of the United States, regardless of their size or market capitalization.
13. iShares Core MSCI EAFE ETF (IEFA)
The iShares Core MSCI EAFE ETF is a low-cost ETF that tracks the MSCI EAFE Index. This index includes all publicly traded stocks in developed markets outside of the United States and Canada.
14. Vanguard Small-Cap Index Fund Admiral Shares (VSMAX)
The Vanguard Small-Cap Index Fund Admiral Shares is a low-cost index fund that tracks the CRSP US Small Cap Index. This index includes the smallest 2,500 publicly traded stocks in the United States.
15. iShares Core S&P Small-Cap 600 ETF (IJR)
The iShares Core S&P Small-Cap 600 ETF is a low-cost ETF that tracks the S&P SmallCap 600 Index. This index includes the smallest 600 publicly traded stocks in the United States.
Small-cap stocks are generally riskier than large-cap stocks, but they also have the potential for higher returns. The iShares Core S&P Small-Cap 600 ETF is a good way to invest in small-cap stocks without having to pick individual stocks.
16. Vanguard Mid-Cap Index Fund Admiral Shares (VIMAX)
The Vanguard Mid-Cap Index Fund Admiral Shares is a low-cost index fund that tracks the CRSP US Mid Cap Index. This index includes the 400 largest publicly traded stocks in the United States that are not included in the S&P 500 index.
Benefits of investing in low-cost index funds
There are many benefits to investing in low-cost index funds, including:
- Diversification: Index funds invest in a basket of stocks, which helps to reduce your risk.
- Low cost: Index funds have relatively low expense ratios, which means that you keep more of your returns.
- Simplicity: Index funds are easy to invest in and manage.
- Tax efficiency: Index funds are generally tax-efficient investments.
How to choose the right low-cost index funds for you
When choosing low-cost index funds to invest in, it is important to consider your investment goals, risk tolerance, and time horizon.
If you are investing for the long term and have a high risk tolerance, you may want to consider investing in a total stock market index fund or a total world stock market index fund. These funds provide the broadest exposure to the stock market.
If you have a lower risk tolerance or are investing for a shorter time horizon, you may want to consider investing in a more diversified portfolio that includes a mix of stock and bond index funds.
You should also consider the expense ratios of the index funds you are considering. The expense ratio is a percentage of your investment that is used to cover the costs of managing the fund. Lower expense ratios mean that you keep more of your returns.
Where to buy low-cost index funds
You can buy low-cost index funds from a variety of financial institutions, including:
- Brokerage firms
- Mutual fund companies
- Exchange-traded fund (ETF) providers
Conclusion
Low-cost index funds are a great way to invest in the stock market. They are diversified, low-cost, and easy to invest in. If you are looking for a simple and effective way to invest in the stock market, low-cost index funds are a great option to consider.
Additional information
Here are some additional things to keep in mind when investing in low-cost index funds:
- Rebalancing: It is important to rebalance your portfolio periodically to ensure that it remains aligned with your investment goals and risk tolerance. Rebalancing involves selling some of your winners and buying more of your losers.
- Tax considerations: Index funds can be tax-efficient investments, but there are still some tax implications to consider. For example, if you sell shares of an index fund that have appreciated in value, you may be liable for capital gains taxes.
- Risk: Even though index funds are diversified, they are still subject to market risk. This means that the value of your investment can go down as well as up.
If you have any questions about investing in low-cost index funds, be sure to speak with a financial advisor.
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