10 Popular Index Funds That Savvy Investors Know About

People learning how to start investing may find the number of investment options overwhelming. One way to narrow down your list of choices is by choosing a particular method, such as index investing. But even if you’ve determined you want to be an index investor, you may wonder what the best index funds available are.

The answer to that question depends on each person’s investing goals, timeline, and many other factors. Thankfully, plenty of index fund options exist for most types of investors. The trickier part is finding the specific ones you want to invest in.

Below, we cover 10 popular index funds other people are investing in, as well as the basics of index investing you should know.

Why you might invest in index funds

Index funds are a type of passively managed investment that aim to track the returns of an index. For example, an S&P 500 index fund attempts to mimic the S&P 500. S&P stands for Standard & Poor, which is the company that created this benchmark index. 

Index funds generally purchase the same assets that are held within an index. If the index changes, the index fund typically buys or sells investments to mimic the changes of the particular index. This allows the index fund to essentially mirror the returns of the index.

Index fund investing allows you to own a wide variety of investments by purchasing a single fund. It simplifies investing and helps with the diversification of your portfolio without requiring you to buy each asset within the index.

These funds aren’t perfect, though. Fund managers have to oversee index funds, which means fees are involved to cover those costs. These fees reduce your returns slightly, but the reduced return is often worth the ease of owning an index fund versus building your own portfolio and managing it.

Index funds can be in the form of either mutual funds or exchange-traded funds (ETFs). Mutual funds update their current net asset value, which is roughly equivalent to the share price of a stock, once per day and can’t be traded on the open market during market hours. ETFs allow you to buy and sell them during market hours and their pricing updates throughout the day. ETFs usually have lower costs than mutual funds, but both types of index funds are often considered low-cost investments compared to actively managed funds that try to beat the market.

We’ve compiled the below list of popular index funds to give you an idea of some choices in the market so you can determine which might be a good fit for you. We included various fund types to offer options for people with different investing goals while keeping a particular eye on low-cost index fund options. Consider how these funds could help you meet your investing goals.

Fidelity ZERO Large Cap Index Fund

The Fidelity ZERO Large Cap Index Fund (FNILX) intends to mimic the total returns of large-cap U.S. companies. This fund invests in at least 80% of stocks included in the Fidelity U.S. Large Cap Index.

Large capitalization stocks are stocks of the 500 largest U.S. companies based on float-adjusted market capitalization, which is the company’s total value based on the stock market. This fund features a 0% expense ratio and $0 minimum investment, which makes it an affordable potential option for new investors.

Expense ratio: 0.00%

Minimum investment: $0

Vanguard Total Stock Market ETF

The Vanguard Total Stock Market ETF (VTI) aims to track the CRSP US Total Stock Market Index. This index includes large-, mid-, and small-cap stocks in the growth and value investing styles.

As a Vanguard fund, this fund focuses on offering an extremely low expense ratio of just.03%. Because it is an ETF, you must buy a whole share unless you use a brokerage that allows fractional share investing in this ETF.

Expense ratio: .03%

Minimum investment: 1 share

SPDR S&P 500 ETF Trust

The SPDR S&P 500 ETF Trust (SPY) seeks to track the S&P 500 index’s performance. The S&P 500 is composed of 500 large cap companies’ stocks, but not necessarily the largest companies. This particular fund cannot reinvest dividends between distributions because of its structure, which means its returns may slightly lag the index.

Expense ratio: .09%

Minimum investment: 1 share

iShares MSCI USA Min Vol Factor ETF

The iShare MSCI USA Min Vol (Minimum Volatility) Factor ETF (USMV) manages its investments to track an index made up of U.S. stocks that have less volatility (swings in price) compared with the entire market. In theory, this would help you earn returns while suffering fewer price changes. The top holding at the time of writing (as of December 02, 2021) was Nextera Energy Inc., with a 1.53% weighting.

Expense ratio: .15%

Minimum investment: 1 share

Franklin FTSE Japan ETF

Individuals looking to invest in Japan as part of an international strategy might want to consider the Franklin FTSE Japan ETF (FLJP). This fund invests in large- and medium-sized companies in Japan. In particular, it tracks the FTSE Japan Capped Index.

International exposure is a key factor in some investment portfolios, but deciding which countries or regions to invest in may be more complex.

Expense ratio: .09%

Minimum investment: 1 share

Schwab U.S. Mid-Cap ETF

The Dow Jones U.S. Mid-Cap Index is the index the Schwab U.S. Mid-Cap ETF (SCHM) intends to track. These mid-sized companies give you exposure to a different set of investments than the large cap indexes offer.

This ETF’s largest holding, On Semiconductor Corp, (ON), makes up only .64% of the ETF’s assets at the time of writing (as of December 02, 2021). Only three other stocks exceed .50% of assets, with the remainder falling under this level.

Expense ratio: .04%

Minimum investment: 1 share

iShares Core S&P Small-Cap ETF

The iShares Core S&P Small-Cap ETF (IJR) mimics an index composed of small-cap U.S. equities. These smaller companies aren’t as proven as the behemoth companies in large-cap indexes, but could offer potential growth opportunities. This fund’s largest non-money market holding is Macy's coming in at a .78% weighting as of December 02, 2021.

Expense ratio: .06%

Minimum investment: 1 share

Invesco S&P 500 Equal Weight ETF

The Invesco S&P 500 Equal Weight ETF (RSP) uniquely tracks the S&P 500 index. Rather than following the S&P 500 index as it stands, this ETF applies equal weighting.

The regular S&P 500 index uses the market capitalization of each company to determine what percentage of the index it makes up. Therefore, larger companies get a larger allocation in the index. But an equal weight index equally weights the companies, so each gets the same percentage in the fund.

Expense ratio: .20%

Minimum investment: 1 share

iShares Core MSCI Europe ETF

The iShares Core MSCI Europe ETF (IEUR) is a stock index fund that focuses on tracking small-, mid-, and large-cap European stocks. If you’re looking for exposure to European companies of differing sizes, this fund could help you achieve that part of your investing goals.

Diversifying investments across several regions could help if one region's investments falter while another area has assets that are still growing.

Expense ratio: .09%

Minimum investment: 1 share

Vanguard Growth Index Fund ETF

The Vanguard Growth Index Fund ETF (VUG) aims to mimic the CRSP US Large Cap Growth Index. The largest holdings at the time of writing are names you’ll recognize, such as Apple, Inc., Microsoft Corp., and Amazon.com Inc.

As with most Vanguard funds, this ETF offers low fees, with a low expense ratio of just .04%. Because it is an ETF, there is no minimum investment other than having enough money to purchase a share, or a partial share depending on your brokerage.

Expense ratio: .04%

Minimum investment: 1 share

An easier way to invest in index funds

Traditionally, people bought index mutual funds or index ETFs through a brokerage firm. In many cases, they simply purchased the funds their particular brokerage offered to save on fees. For instance, a person would buy Vanguard index funds in a Vanguard account rather than Fidelity index funds to avoid costs that may apply when purchasing outside funds.

This method is still a valid way to buy index funds. If the idea of finding a particular broker that offers a series of index funds you want to purchase sounds like something you’d prefer, you might browse our list of best brokerage accounts to find a good fit for you.

Thankfully, technology makes buying both types of index funds more accessible than ever. Many investing apps allow people to purchase investments in fractional shares with little to no initial account deposit requirements. This could enable you to invest with less money than traditional brokerage accounts may require.

A number of investing apps offer features to help beginner investors, such as automatic recurring investments, portfolio design, automatic rebalancing, and more. 

Check our list of the best investment apps to find an app that might meet your investing needs.

FAQs

Bottom line

Each person might have their own ideas about how to invest money most effectively. Although some people prefer the active stock picking approach, investing in stock index funds or bond index funds might help beginners start investing without the overwhelming feeling of picking from thousands of individual items.

Consider the index funds listed above to see whether they could help you meet your investing and personal finance goals.