Low cost index funds

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IMPORTANT FEE INFORMATION: Vanguard funds may charge an annual account service fee of $20 for fund balances below $10,000. Vanguard offers other share classes of these funds with different investment minimums and expense ratios.

Please note: When comparing funds, please consider all important factors, including information pertaining to fund fees, fund features, and fund objectives. While funds may track an index, the indexes and strategies employed in seeking to achieve an investment goal may be different. Each fund's investment object and strategy and index tracked to achieve investment goals may differ. For new investors, funding investment minimums may be different.

ETFs are subject to market fluctuation and the risks of their underlying investments. ETFs are subject to management fees and other expenses. Unlike mutual funds, ETF shares are bought and sold at market price, which may be higher or lower than their NAV, and are not individually redeemed from the fund. ETFs are subject to market fluctuations of their underlying investments and may trade at a discount to NAV.

1. Fidelity beats Vanguard on expenses on 24 of 24 comparable stock and bond index funds, across all Vanguard share classes with a minimum investment of less than $3 billion. Total expense ratios as of December 30, 2020. Please consider other important factors including that each fund’s investment objectives, strategy, and index tracked to achieve its goals may differ, as well as each fund’s features and risks.

2. Fidelity now offers the Fidelity ZERO Large Cap Index Fund (FNILX), Fidelity ZERO Extended Market Index Fund (FZIPX), Fidelity ZERO Total Market Index Fund (FZROX) and Fidelity ZERO International Index Fund (FZILX) available to individual retail investors who purchase their shares through a Fidelity brokerage account.

3. Zero account minimums and zero account fees apply to retail brokerage accounts only. Expenses charged by investments (e.g., funds, managed accounts, and certain HSAs) and commissions, interest charges, or other expenses for transactions may still apply. See Fidelity.com/commissions for further details.

4. Expense ratio is the total annual fund operating expense ratio from the fund's most recent prospectus. As of March 1, 2019, Fidelity contractually lowered fund operating expense ratios on all comparable funds.

IMPORTANT FUND OBJECTIVE/COMPARISON INFORMATION: Fidelity® 500 Index Fund (tracks S&P 500®), Vanguard 500 Index Fund (tracks S&P 500®); Fidelity® Extended Market Index Fund (tracks DJ US Completion Total Stock Market Index), Vanguard Extended Market Index Fund (tracks S&P Completion Index); Fidelity® Total Market Index Fund (tracks Dow Jones U.S. Total Stock Market Index), Vanguard Total Stock Market Index Fund (tracks CRSP U.S. Total Market Index); Fidelity Large Cap Growth Index Fund (tracks Russell 1000 Growth Index), Vanguard Large Cap Growth Index (tracks CRSP US large Cap Growth Index); Fidelity Large Cap Value Index Fund (tracks Russell 1000 Value Index), Vanguard Large Cap Value Index Fund (tracks CRSP US Large Cap Value Index); Fidelity® Mid Cap Index Fund (tracks Russell Midcap® Index), Vanguard Mid-Cap Index Fund (tracks CRSP U.S. Mid Cap Index); Fidelity Mid Cap Growth Index Fund (tracks Russell Midcap Growth Index), Vanguard Mid-Cap Growth Index (tracks CRSP US Mid Cap Growth Index ), Fidelity Mid Cap Value Index Fund (tracks Russell Midcap Value Index), Vanguard Mid-Cap Value Index (tracks CRSP US Mid Cap Value Index), Fidelity Small Cap Index Fund (tracks Russell 2000 Index), Vanguard Small Cap Index Fund (tracks CRSP US Small Cap Index); Fidelity Small Cap Growth Index Fund (tracks Russell 2000 Growth Index), Vanguard Small-Cap Growth Index (tracks CRSP US Small Cap Growth Index), Fidelity Small Cap Value Index Fund (tracks Russell 2000 Value Index), Vanguard Small-Cap Value Index (tracks CRSP US Small Cap Value Index), Fidelity International Index Fund (tracks MSCI EAFE Index), Vanguard Developed Markets Index Fund (tracks FTSE Developed ex US All Cap Index); Fidelity® Global ex U.S. Index Fund (tracks MSCI ACWI ex U.S. Index), Vanguard FTSE All-World ex-US Index Fund (tracks FTSE All-World ex-US Index); Fidelity Total International Index Fund (tracks MSCI ACWI ex US IMI Index), Vanguard Total International Index Fund (tracks FTSE Global All Cap ex US index); Fidelity Emerging Markets Index Fund (tracks MSCI Emerging Index), Vanguard Emerging Markets Index Fund (tracks FTSE Emerging Markets All Cap China A Transition Index); Fidelity® Real Estate Index Fund (tracks MSCI US IMI Real Estate 25/25 Index), Vanguard REIT Index Fund (tracks MSCI US REIT Index); Fidelity US Bond Index fund (tracks Bloomberg Barclays U.S. Aggregate Bond Index), Vanguard Total Bond Market Index Fund (tracks Bloomberg Barclays U.S. Aggregate Float Adjusted Index); Fidelity Municipal Bond Index Fund (tracks Bloomberg Barclays Municipal Bond Index), Vanguard Tax-Exempt Bond Index Fund (tracks S&P National AMT-Free Muni Bond Index), Fidelity Short Term Treasury Bond Index Fund (tracks Bloomberg Barclays 1-5 Year U.S. Treasury Index), Vanguard Short-Term Treasury Index Fund Admiral (tracks Bloomberg Barclays U.S. 1–3 Year Government Float Adjusted Index); Fidelity Intermediate Term Treasury Bond Index Fund (tracks Bloomberg Barclays 5-10 Year U.S. Treasury Index), Vanguard Intermediate-Term Treasury Index Fund Admiral (tracks Bloomberg Barclays U.S. 3–10 Year Government Float Adjusted Index); Fidelity Long Term Treasury Bond Index Fund (tracks Bloomberg Barclays U.S. Treasury Long Index), Vanguard Long-Term Treasury Index Fund Admiral (tracks Bloomberg Barclays U.S. Long Government Float Adjusted Index).; Fidelity Short-Term Bond Index Fund (tracks Bloomberg Barclays U.S. 1 – 5 Year Government/Credit Bond Index), Vanguard Short-Term Bond Index Fund (tracks Bloomberg Barclays U.S. 1 – 5 Year Government/Credit Bond Index); With the exception of the Fidelity 500 Index Fund and Vanguard 500 Index Fund which both track the S&P 500, the Vanguard and Fidelity funds track different indexes, which may have different characteristics an investor should consider. Fidelity and Vanguard funds have similar investment objectives. Fidelity MSCI Sector ETFs are passively managed ETFs indexed to the MSCI USA IMI Sector Indexes. Vanguard Sector ETFs are passively managed ETFs indexed to the MSCI U.S. IMI 25-50 Sector Indexes.

Third-party trademarks and service marks are the property of their respective owners. All other trademarks and service marks are the property of FMR LLC or its affiliated companies.

Indexes are unmanaged. It is not possible to invest directly in an index.

System availability and response times may be subject to market conditions.

Diversification does not ensure a profit or guarantee against loss.

Because of their narrow focus, sector funds tend to be more volatile than funds that diversify across many sectors and companies.

Keep in mind that investing involves risk. The value of your investment will fluctuate over time, and you may gain or lose money.

Before investing in any mutual fund or exchange-traded fund, you should consider its investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus, an offering circular, or, if available, a summary prospectus containing this information. Read it carefully.

Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917

Sours: https://www.fidelity.com/mutual-funds/investing-ideas/index-funds

The 10 Best Low-Cost Index Funds

Low-cost index funds are those with low expense ratios, or annual management fees. Investors who focus on minimizing their investing costs can generate vastly superior returns over time since money lost to fees is money no longer compounding on itself in your investment account.

Many investors prefer index funds -- which are a type of exchange-traded fund (ETF) -- over mutual funds because of their lower expense ratios and tax-efficient nature. Index-tracking ETFs typically have low expense ratios because they are passively managed, which keeps operating expenses low. Passive investing strategies don't require any in-house stock analysis or active trading.

Choosing a low-cost index fund

Low-cost index funds fit into a few different categories. Understanding these different types can help you choose the best low-cost index fund for you:

  • Total U.S. stock market funds: Investing in total U.S. stock market funds, which track indexes that include all publicly traded U.S. companies, is a solid choice for ultra-minimalist investors who want broad-based exposure to the U.S. stock market.
  • S&P 500 index funds: Funds that track the S&P 500 offer one of the simplest ways to gain diversified exposure to America's largest companies.
  • Index funds by market segment: Investing in ETFs by market segment is another way to structure your low-cost index fund portfolio. Investing in index funds focused on large-cap, mid-cap, or small-cap companies can help you tailor your portfolio in accordance with your risk appetite.

You can also choose to invest in several of these types of low-cost index funds to maximize your portfolio's diversification.

Best low-cost index funds

These index funds have some of the lowest expense ratios:

Index Fund

Expense Ratio

Assets Under Management

Vanguard S&P 500 ETF(NYSEMKT:VOO)


$739.5 billion

Vanguard Large-Cap ETF(NYSEMKT:VV)

0.04%$36.7 billion

Schwab U.S. Large-Cap ETF(NYSEMKT:SCHX)


$30.4 billion

Vanguard Mid-Cap ETF(NYSEMKT:VO)


$151.3 billion



$9.7 billion

Vanguard Small-Cap ETF(NYSEMKT:VB)0.05%$135.2 billion
iShares Core S&P Small-Cap ETF(NYSEMKT:IJR)0.06%$72.4 billion

Schwab U.S. Broad Market(NYSEMKT:SCHB)


$21.2 billion

iShares Core S&P Total US Stock Market(NYSEMKT:ITOT)


$39.6 billion

Vanguard Total Stock Market ETF(NYSEMKT:VTI)


$1.2 trillion*

Data sources: Fund providers, ETFdb.com. *Includes both ETF and mutual fund classes.

Let's take a deeper dive into several of these low-cost index funds:

Vanguard Total Stock Market Index Fund ETF

If you want to hold a single index fund ETF that invests in the total U.S. stock market in the right proportions, then the Vanguard Total Stock Market Index Fund ETF is your best option. Holding shares in this fund makes owning other stocks or ETFs redundant unless you want to concentrate your portfolio's exposure in a particular segment of the market.

By holding shares in this fund, you'll hold large-, mid-, and small-cap companies proportional to the broader market — and at a bargain basement expense ratio.

For the set-it-and-forget-it investor, this strategy is very difficult to match from a time and cost efficiency perspective. Many fund management companies offer total market funds at similarly low costs.

Vanguard S&P 500 ETF

The Vanguard S&P 500 ETF tracks the S&P 500(SNPINDEX:^GSPC), the benchmark index weighted by market capitalization that includes America's 500 largest companies. The broad diversification of this fund is appealing to many investors. 

The S&P 500 is "self-cleansing," meaning that when a particular company no longer qualifies for inclusion in the index, it is removed and replaced by a growing company that does deserve to be included. The formulaic nature of the inclusion process ensures that only high-quality companies are listed by the S&P and invested in by the Vanguard S&P 500 ETF.

Vanguard Mid-Cap ETF

The Vanguard Mid-Cap ETF invests in companies with mid-range market values, typically between $2 billion and $10 billion. The mid-cap market segment includes companies with established businesses and reliable revenue streams, many of which have yet to grow into their full potential.

This ETF tracks the CRSP U.S. Mid-Cap Index by aiming to hold the same stocks as the index and in the same proportion. The fund's small expense ratio of 0.04% is competitive among mid-cap ETFs.

Vanguard Small-Cap ETF

The Vanguard Small-Cap ETF is an attractive option if you want to invest in companies that have the most growth potential. This fund tracks the CRSP U.S. Small-Cap Index, which focuses on U.S. companies in the bottom 15% to bottom 2% by market cap.

Investing in a low-cost, small-cap index fund ETF like the Vanguard Small-Cap ETF can boost your overall returns. But, due to its small-cap focus, the performance of this ETF can be more volatile than other investments.

Is a low-cost index fund right for you?

Paying higher fees to invest in an actively managed fund erodes your ability to generate compound interest. While index funds are generally broad-based, you can gain additional portfolio exposure to specific market segments by allocating more money to specific stocks or funds in accordance with your investment preferences.

With the availability of so many low-cost index funds, there's little reason to pay more than the bare minimum in fees. Adding a low-cost index fund to your portfolio keeps more of your hard-earned money in your own pocket.

Sours: https://www.fool.com/investing/how-to-invest/index-funds/low-cost-index-funds/
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7 Low-Cost ETFs: Should You Invest?

Exchange-traded funds (ETFs) are amazing investment tools, allowing long-term investors to pay low management fees while giving traders opportunities to make massive amounts of money in short periods of time—if they know what they’re doing.

If you’re not 100% confident in your stock trading abilities and lack full conviction in your positions, then your emotion will likely get in the way in your investments. If this describes you, then you’re much better off taking a passive approach to investing, which can be done through low-cost ETFs.

The seven ETFs covered below have some of the lowest expense ratios you will find throughout the entire ETF universe. While that doesn’t necessarily mean they’re the best investment options at this point in time, they will definitely cost you the least as you continually improve your investment strategy.

All numbers below are as of Oct. 2, 2021.

1. iShares Treasury Floating Rate Bond (TFLO)

Purpose: The iShares Treasury Floating Rate Bond (TFLO) tracks the performance of the U.S. Treasury Floating Rate Index, which is composed of U.S. Treasury floating rate bonds.

Net Assets: $271.437 million

Volume: 139,140.00

Dividend Yield: 0.05%

Expense Ratio: 0.15%

1-Year Performance: 0.00%

TFLO Analysis

Unless you’re interested in waiting very patiently to take advantage of mispricings or you have a substantial amount of capital and want to implement a professional trading strategy to pick up small returns, this run-of-the-mill fund is only advantageous in a bear market.

2. First Trust NASDAQ CEA Cybersecurity ETF (CIBR)

Purpose: The First Trust NASDAQ CEA Cybersecurity ETF (CIBR) tracks the performance of the CEA Cybersecurity Index.

Net Assets: $4.06 billion

Volume: 459,030

Dividend Yield: 0.20%

Expense Ratio: 0.60%

1-Year Performance: 41.85%

CIBR Analysis

This relatively new ETF launched in mid-summer 2015, yet while its five-year returns are promising, CIBR's return performed poorly in comparison to others in the technology category. The gamble is up to you: cybersecurity is going to continue to be important in the digital world, but will white-hat hackers continue to harness technology for good?

3. Schwab US Broad Market ETF (SCHB)

Purpose: The Schwab US Broad Market ETF (SCHB) tracks the Dow Jones Broad Stock Market Index – the largest 2,500 publicly traded companies in the U.S.

Net Assets: $21.86 billion

Volume: 1,111,681

Dividend Yield: 1.33%

Expense Ratio: 0.03%

1-Year Performance: 44.28%

SCHB Analysis

This ETF launched back in 2009. If you’re bullish, then it’s an option to consider, and the fund has considerably increased its volume in the past few years. This large blend ETF casts a wide net.

4. Vanguard Total Stock Market ETF (VTI)

Purpose: The Vanguard Total Stock Market ETF (VTI) tracks the performance of the CRSP U.S. Total Market Index, which is all stocks on the NYSE and NASDAQ.

Net Assets: $1.26 trillion

Volume: 5,093,702

Dividend Yield: 1.26%

Expense Ratio: 0.03%

1-Year Performance: 44.42%

VTI Analysis

VTI has many of the same top holdings as SCHB and these two ETFs trade in tandem most of the time. But VTI offers a lot more liquidity and a slightly higher yield.

5. Vanguard S&P 500 ETF (VOO)

Purpose: The Vanguard S&P 500 ETF (VOO) tracks the performance of the S&P 500 and is one of the best baseline S&P 500 baseline funds.

Net Assets: $753.41 billion

Volume: 8,482,196

Dividend Yield: 1.34%

Expense Ratio: 0.03%

1-Year Performance: 40.97%

VOO Analysis

Trades along with SCHB and VTI despite a different design. It has many of the same top 10 holdings but VOO offers a high yield as well as plenty of liquidity.

6. Schwab International Equity ETF (SCHF)

Purpose: The Schwab International Equity ETF (SCHF) tracks the total return of the FTSE Developed ex-U.S. Index. In simpler terms, it tracks the performance of large-cap and mid-cap stocks in developed countries excluding the United States.

Net Assets: $26.99 billion

Volume: 4,598,763

Dividend Yield: 2.16%

Expense Ratio: 0.06%

1-Year Performance: 35.68%

SCHF Analysis

This fund, while attractive in concept, has not historically provided strong returns unless investors are looking specifically to diversity outside of the U.S. Otherwise, if you’re going to invest in a developed market, it might as well be the U.S.

7. iShares Core S&P 500 (IVV)

Purpose: The iShares Core S&P 500 (IVV) tracks the performance of the S&P 500.

Net Assets: $294.95 billion

Volume: 6,784,032

Dividend Yield: 1.28%

Expense Ratio: 0.03%

1-Year Performance: 36.41%

IVV Analysis

Many of IVV’s top holdings are the same as SCHB, VTI, and VOO. So, while IVV trades the same as those ETFs, you should look at other factors as well. The yield for IVV and the expense ratio are very comparable to the other ETFs. I'd call it a wash.

The Bottom Line

These are several high-quality ETFs that would be good options in a bull market. Whether you’re a bull or a bear, you should strongly consider putting some of these ETFs on your watch list for future consideration.

At the time this article was written,Dan Moskowitz did not have any positions in TFLO, CIBR, SCHB, VTI, VOO, SCHF or IVV. He was long LABD. 

Sours: https://www.investopedia.com/articles/investing/091015/7-very-affordable-etfs-should-you-invest.asp
The 5 BEST Index Funds That Will Make You RICH

5 Potential Warnings About Index Funds

Investing in index mutual funds and ETFs gets a lot of positive press, and rightly so. Index funds, at their best, offer a low-cost way for investors to track popular stock and bond market indexes. In many cases, index funds outperform the majority of actively managed mutual funds.

One might think investing in index products is a no-brainer, a slam-dunk. However, to nobody’s surprise, the providers of mutual funds and exchange traded funds (ETFs) have created a slew of new index products in response to the popularity of index investing. Here are five things to know about index funds as you plan your investment strategy.

Key Takeaways

  • Index funds have become a major force among investors who seek passive index strategies as opposed to active management.
  • Indexing has several benefits including lower costs, broad-based diversification, and lower taxes.
  • Investors, however, must consider the index fund that they select since not every one is low-cost, not some may be better at tracking an index than others.
  • Moreover, owning an index does not mean you are immune from risk or losses if the markets take a downturn.

5 Reasons To Avoid Index Funds

Not All Index Funds Are Cheap

People who work for large corporations often have the opportunity to invest in low-cost index funds offered in 401(k) plans that offer institutional shares of certain funds. If your 401(k) plan contains index funds from providers such as Vanguard Group or Fidelity Investments, you can be pretty confident that these are low-cost. Both funds from these families offer share classes with even lower expense ratios and also offer a full range of index funds across various stock and bond asset classes.

Many 401(k) plans, unfortunately, do not offer index funds this cheap. This may be true if your plan provider is an insurance company or brokerage firm offering its own proprietary funds. While the advice to focus on index funds in your 401(k) plan is often sound, make sure that you look at the index funds offered in your plan to ensure that you are making the best choices. For 401(k) participants fortunate enough to have a selection of several low-cost index funds, the advantage over higher-cost active funds can be significant.

All Indexes Are Not Created Equal

There is a wide range of low-cost index mutual funds and ETFs covering widely used indexes across the nine domestic Morningstar style boxes, as well as widely used foreign stock indexes. The same holds true on the fixed income side of things.

The proliferation of ETF index products in recent years has led to a whole slew of index funds with underlying indexes that were essentially created in the “lab” with results that are largely back-tested as opposed to having real market results. While back-testing is a valid analytical tool, investors need to be careful about ETFs using indexes that consist of a large amount of back-tested historical results. There are few to no known rules governing the underlying assumptions used in applying this data and the simulated results may not be an accurate portrayal of the risks of ETF.

Index Funds Don't Necessarily Reduce the Risk of Loss

Investors in an index fund or ETF tracking the S&P 500 during 2008 lost roughly 37% plus the fund’s expenses reflecting the decline in the underlying index. Investors in index products tracking real estate in the form of a real estate investment trust (REIT) or emerging market stocks suffered large losses as well.

Index fund investors do, however, eliminate manager risk. This is the risk of an active manager underperforming the benchmark associated with their investment style due to the investment choices they make in managing the fund.

Underlying Indexes May Change

Vanguard, who is a large player in both index mutual funds and ETFs, recently changed the underlying indexes for a number of their core index mutual funds such as Vanguard Mid Cap Index (VIMAX), Vanguard Small Cap Index (VSMAX), among several others. This was done in large part to maintain Vanguard's status as one of the lowest cost index fund shops. While not impacting most buy-and-hold investors, one should stay on top of their funds' holdings for changes like this, as mutual fund providers continue to compete on price. 

Index Funds Don't Ensure Investment Success

Just investing in an index fund or two doesn't mean that you're on your way towards achieving your investment or financial planning goals. Index funds are tools just like any other investment product. In order to gain the most benefit from using index funds either exclusively or in combination with active funds, you need to have a strategy.

Index funds work quite well as part of an asset allocation plan. Index funds (at least the ones tracking basic core benchmarks) offer purity within their investment styles. Many financial advisers put together portfolios of index funds that are allocated in line with their client’s risk tolerance and their financial plan. Others may use a “core and explore” approach where index funds make up much of the portfolio (the core) with selected active funds to hopefully enhance returns (the explore portion).

The Bottom Line

Investing in index mutual funds and ETFs can be an excellent low-cost strategy for all or a part of your investment portfolio. Like any other investment strategy, investing in index funds requires that you understand what you are investing in. Not all index products are the same and investors need to look beyond the “index fund” label to ensure they are truly investing in a low-cost product that tracks a benchmark that fits with their investing strategy.

Sours: https://www.investopedia.com/articles/investing/103114/5-things-you-need-know-about-index-funds.asp

Funds low cost index

12 Cheapest Index Funds to Buy

The cheapest index funds are often the best to buy because they all do much the same thing: they passively track a market index. Often, it doesn't make sense to buy high-priced index funds, because the cheap ones can achieve the same goal.

It may not make sense to buy a fund that comes with a sales charge, which might be in the form of a front-load (paid when you're buying shares) or a back-load (paid when you're selling shares). Sales charges only make sense when you're getting solid advice and top-notch active management. You don't need this input with index funds if you do a little homework, so always go with no-load funds.

Here are some of the cheapest index funds, as measured by their expense ratios as of May 2021. They're broken into six categories.

Think of it like you're buying a food staple such as bread. Three different brands likely have all the same ingredients, so buy the cheapest one! Follow the same logic when you're buying index funds.

Cheapest S&P 500 Index Funds

These index funds track the S&P 500 index, which consists of about 500 U.S. large-company stocks measured by market capitalization. Schwab S&P 500 Index (SWPPX) has an expense ratio of 0.02%, or $2 for every $10,000 invested. There's no minimum investment to start out.

The Fidelity 500 Index (FXAIX) expense ratio is also 0.015%. There's no minimum investment.

These are very low expenses, especially when they're compared to some of the average expense ratios for mutual funds, which are often more than 10 times these figures, often up to 1.5%.

Cheapest Large Growth Stock Index Funds

Large growth index funds often track the Russell 1000 Growth index, the Nasdaq Composite, or the Nasdaq-100. They invest in the largest U.S. company growth stocks by market capitalization.

You'll get many of the same stocks as in S&P 500 index funds, but these will be only growth stocks, and they tend to be more aggressive. They have a higher risk compared to other stocks, but they also have higher potential long-term returns.

The Vanguard Growth Index Fund Admiral Shares (VIGAX) is one of the cheapest mutual funds tracking a large-cap growth U.S. stock index. Its expense ratio is 0.05%, or $5 for every $10,000 invested. The minimum initial investment is $3,000. There's also the Vanguard Growth ETF (VUG) with a 0.04% expense ratio and no minimum investment if you have less than $3,000 to invest.

The Fidelity NASDAQ Composite Index (FNCMX) expense ratio is 0.29%, or $29 for every $10,000 invested. There is no minimum investment.

Both funds are highly rated, so you get good quality at a low cost.

Cheapest Large Value Stock Index Funds

There aren't many stock index funds that track value stock indices. There are a few that are quite costly, and a few that are good and cheap. Value stocks are often underappreciated in the market, so they sell at a discount. Mutual funds that pay dividends are often value funds. Value stock index funds tend to track the Russell 1000 Value index or the S&P 500 Value index.

The Vanguard High Dividend Yield Index Admiral Shares (VHYAX) expense ratio is 0.08%, or $8 for every $10,000 invested. The minimum initial investment is $3,000. Vanguard High Dividend Yield ETF(YVM)is similar but with no minimum.

Vanguard Value Index Admiral Shares (VVIAX) has an expense ratio of 0.05%, or $5 for every $10,000 invested. The minimum initial investment is $3,000. Vanguard Value ETF (VTV) is similar but with no minimum.

Value funds can be good if you're looking for long-term growth or current income from investments.

Cheapest Mid-Cap Stock Index Funds

As with large-cap index funds, you can find mid-cap stock index funds that track a growth index, a value index, or an index that blends the two styles. Mid-cap stock mutual funds that track indices, such as the S&P MidCap 400 index or the Russell Mid Cap Index, often include a blend of both growth and value.

The Northern Mid Cap Index(NOMIX) expense ratio is 0.15%, or $15 for every $10,000 invested. The minimum startup investment is $2,500.

Vanguard Mid Cap Index Admiral Shares (VIMAX) has an expense ratio of 0.05%, or $5 for every $10,000 invested. The minimum initial investment is $3,000.Vanguard Mid-Cap ETF (VO) is the equivalent ETF with no minimum.

Mid-cap stocks often carry more market risk than large-cap stocks, but they tend to perform better in the long run. They often have less market risk than small-cap stocks, but they can perform just as well. Mid-caps fall into a "sweet spot" of investing that can be a good fit for long-term investors who are willing to take more risk for higher returns.

Cheapest Small Cap Stock Index Funds

These small-cap stock index funds track an index that blends both growth and value styles. They track small-cap indices like the Russell 2000 Index or the S&P SmallCap 600 index.

The Northern Small Cap Index (NSIDX) expense ratio is 0.15%, or $15 for every $10,000 invested. The minimum startup investment is $2,500.

The Schwab Small Cap Index(SWSSX) expense ratio is 0.04%, or $4 for every $10,000 invested. There's no minimum investment to get started.

Small-cap stocks are riskier than large- and mid-cap stocks, but they can deliver very good returns in the long run, especially if you can keep expenses low.

Cheapest International Stock Index Funds

International stock index funds often track the MSCI EAFE Index or the MSCI ACWI index, both of which consist of the stocks of companies outside the U.S.

Vanguard Total International Stock Index Admiral Shares (VGTSX) has an expense ratio of 0.11%, or $11 for every $10,000 invested. The minimum investment is $3,000.

The Schwab International Index Fund(SWISX) expense ratio is 0.06%, or $6 for every $10,000 invested. There is no minimum initial investment.

International stock index funds provide a smart, easy way to capture the entire market outside the U.S. A diversified portfolio will usually include some of these stocks.

Cheapest Bond Index Funds

There are many kinds of bond index funds, but the best and most common are those that capture the entire U.S. bond market. These track the Bloomberg Barclays Capital Aggregate US Bond Index, which covers all major types of bonds, including taxable corporate bonds, Treasury bonds, and municipal bonds.

The Vanguard Total Bond Index Admiral Shares(VBTLX) expense ratio is 0.05%, or $5 for every $10,000 invested. The smallest initial investment is $3,000. Vanguard Total Bond Market ETF (BND)is the equivalent ETF with a 0.035% expense ratio. There's no minimum investment.

The Northern Bond Index(NOBOX) has an expense ratio of 0.15%, or $15 for every $10,000 invested. The minimum investment is $2,500.

One cheap total bond market index is enough for most investors to include in a portfolio of mutual funds.

How to Buy the Cheapest of the Cheap?

Some of the best no-load mutual fund companies, such as Vanguard Investments, offer share classes of index funds with lower expense ratios if you make a higher initial investment.

You get the cheapest S&P 500 index fund with an expense ratio of 0.04% if you can reach the initial requirement of $3,000 for theVanguard 500 Index Fund "Admiral" share class (VFIAX). The Vanguard S&P 500 ETF (VOO) has a 0.03% expense ratio with no minimum investment.

Index Funds FAQs

How Many Index Funds Should I Own?

The number of index funds you own should depend on how narrowly those indexes are focused. If you're looking at an S&P 500 fund and a total bond market fund, those two index funds may be all you need. However, if you want to buy a small-cap fund, then you might want to balance that out with a large-cap fund. If you want to buy an international stock fund, then you might want to balance that out with a domestic stock fund. The more specific you get, the more funds you need to buy to replicate a diverse portfolio.

Where Can I Buy Index Funds?

Index funds like the ones discussed here can be bought through a broker. You'll need a brokerage account or a retirement account to purchase these funds. Opening one of these accounts is similar to the process of opening a bank account. Once you have your account, find the fund you want to buy and place a buy order. Keep in mind that not all brokerages offer the same funds, so if you have a specific fund in mind, then you'll want to ensure you open an account with a brokerage that offers access to that fund.

How Are Index Funds Taxed?

When you buy indexed mutual funds, you will incur taxes on three occasions. First, any dividends from holdings (or in the case of bonds, interest payments) will be passed onto you and you will owe taxes on those dividends. Mutual funds also pass along any capital gains from sales within the funds, and you will be taxed on those gains according to whether they were short-term or long-term gains. However, as an index fund investor, you're less likely to incur as many capital gains taxes as you would with actively managed funds. Finally, if the value of the mutual fund shares has grown, you will incur capital gains taxes (either long-term or short-term) when you sell your mutual fund shares.

The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.

Sours: https://www.thebalance.com/cheapest-index-funds-to-buy-4067421
The 5 BEST Index Funds That Will Make You RICH

Best index funds in October 2021

Index funds are popular with investors because they promise ownership of a wide variety of stocks, greater diversification and lower risk – usually all at a low price. That’s why many investors, especially beginners, find index funds to be superior investments to individual stocks.

Among the best are index funds based on the Standard & Poor’s 500 Index (S&P 500). The index includes hundreds of the largest, globally diversified American companies across every industry, making it a relatively low-risk way to invest in stocks. Of course, as 2020 showed, even the whole market can fluctuate dramatically, especially if something momentous happens.

This index is the very definition of the market, and by owning a fund based on the index, you’ll get the market’s return, historically about 10 percent per year. It’s among the most popular indexes.

Here’s everything you need to know about index funds, including five of the top index funds to consider adding to your portfolio this year.

Best index funds for October 2021

The list below includes S&P 500 index funds from a variety of companies, and it includes some of the lowest-cost funds trading on the public markets. When it comes to an index fund like this, one of the most important factors in your total return is cost. Included are two mutual funds and three ETFs:

1. Fidelity ZERO Large Cap Index

2. Vanguard S&P 500 ETF

3. SPDR S&P 500 ETF Trust

4. iShares Core S&P 500 ETF

5. Schwab S&P 500 Index Fund

1. Fidelity ZERO Large Cap Index (FNILX)

The Fidelity ZERO Large Cap Index mutual fund is part of the investment company’s foray into mutual funds with no expense ratio, thus its ZERO moniker. The fund doesn’t officially track the S&P 500 – technically it follows the Fidelity U.S. Large Cap Index – but the difference is academic. The real difference is that investor-friendly Fidelity doesn’t have to cough up a licensing fee to use the S&P name, keeping costs lower for investors.

Expense ratio: 0 percent. That means every $10,000 invested would cost $0 annually.

2. Vanguard S&P 500 ETF (VOO)

As its name suggests, the Vanguard S&P 500 tracks the S&P 500 index, and it’s one of the largest funds on the market with hundreds of billions in the fund. This ETF began trading in 2010, and it’s backed by Vanguard, one of the powerhouses of the fund industry.

Expense ratio: 0.03 percent. That means every $10,000 invested would cost $3 annually.

3. SPDR S&P 500 ETF Trust (SPY)

The SPDR S&P 500 ETF is the granddaddy of ETFs, having been founded all the way back in 1993. It helped kick off the wave of ETF investing that has become so popular today. With hundreds of billions in the fund, it’s among the most popular ETFs. The fund is sponsored by State Street Global Advisors — another heavyweight in the industry — and it tracks the S&P 500.

Expense ratio: 0.09 percent. That means every $10,000 invested would cost $9 annually.

4. iShares Core S&P 500 ETF (IVV)

The iShares Core S&P 500 ETF is a fund sponsored by one of the largest fund companies, BlackRock. This iShares fund is one of the largest ETFs and like these other large funds, it tracks the S&P 500. With an inception date of 2000, this fund is another long-tenured player that’s tracked the index closely over time.

Expense ratio: 0.03 percent. That means every $10,000 invested would cost $3 annually.

5. Schwab S&P 500 Index Fund (SWPPX)

With tens of billions in assets, the Schwab S&P 500 Index Fund is on the smaller side of the heavyweights on this list, but that’s not really a concern for investors. This mutual fund has a strong record dating back to 1997, and it’s sponsored by Charles Schwab, one of the most respected names in the industry. Schwab is especially noted for its focus on making investor-friendly products, as evidenced by this fund’s razor-thin expense ratio.

Expense ratio: 0.02 percent. That means every $10,000 invested would cost $2 annually.

Why are index funds so popular?

The S&P 500 index fund continues to be among the most popular index funds. S&P 500 funds offer a good return over time, they’re diversified and a relatively low-risk way to invest in stocks.

  • Attractive returns – Like all stocks, the S&P 500 will fluctuate. But over time the index has returned about 10 percent annually. That doesn’t mean index funds make money every year, but over long periods of time that’s been the average return.
  • Diversification – Investors like index funds because they offer immediate diversification. With one purchase, investors can own a wide swath of companies. One share of an index fund based on the S&P 500 provides ownership in hundreds of companies.
  • Lower risk – Because they’re diversified, investing in an index fund is lower risk than owning a few individual stocks. That doesn’t mean you can’t lose money or that they’re as safe as a CD, for example, but the index will usually fluctuate a lot less than an individual stock.
  • Low cost – Index funds can charge very little for these benefits, with a low expense ratio. For larger funds you may pay $3 to $10 per year for every $10,000 you have invested. In fact, one fund (listed above) charges you no expense ratio at all. When it comes to index funds, cost is one of the most important factors in your total return.

While some funds such as S&P 500 index funds allow you to own companies across industries, others own only a specific industry, country or even investing style (say, dividend stocks).

How to invest in an index fund in 3 easy steps

It’s surprisingly easy to invest in an index fund, but you’ll want to know what you’re investing in, not simply buy random funds that you know little about.

1. Choose an index fund to invest in

Your first step is finding what you want to invest in. While an S&P 500 index fund is the most popular index fund, they also exist for different industries, countries and even investment styles. So you need to consider what exactly you want to invest in and why it might hold opportunity:

  • Location: Consider the geographic location of the investments. A broad index such as the S&P 500 owns American companies, while other index funds might focus on a narrower location (France) or an equally broad one (Asia-Pacific).
  • Business: Which industry or industries is the index fund investing in? Is it invested in pharma companies making new drugs, or maybe tech companies? Some funds specialize in certain industries and avoid others.
  • Market opportunity: What opportunity does the index fund present? Is the fund buying pharma companies because they’re making the next blockbuster drug or because they’re cash cows paying dividends? Some funds invest in high-yield stocks while others want high-growth stocks.

You’ll want to carefully examine what the fund is investing in, so you have some idea of what you actually own. Sometimes the labels on an index fund can be misleading. But you can check the index’s holdings to see exactly what’s in the fund.

2. Decide which index fund to buy

After you’ve found a fund you like, you can look at other factors that may make it a good fit for your portfolio. The fund’s expenses are huge factors that could make – or cost – you tens of thousands of dollars over time.

  • Expenses: Compare the expenses of each fund you’re considering. Sometimes a fund based on a similar index can charge 20 times as much as another.
  • Taxes: For certain legal reasons, mutual funds tend to be less tax-efficient than ETFs. At the end of the year many mutual funds pay a taxable capital gains distribution, while ETFs do not.
  • Investment minimums: Many mutual funds have a minimum investment amount for your first purchase, often several thousand dollars. In contrast, many ETFs have no such rule, and your broker may even allow you to buy fractional shares with just a few dollars.

3. Purchase your index fund

After you’ve decided which fund fits in your portfolio, it’s time for the easy part – actually buying the fund. You can either buy directly from the mutual fund company or through a broker. But it’s usually easier to buy a mutual fund through a broker. And if you’re buying an ETF, you’ll need to go through your broker.

Things to consider when investing in index funds

As you’re looking at index funds, you’ll want to consider the following factors:

  • Long-run performance: It’s important to track the long-term performance of the index fund (ideally at least five to ten years of performance) to see what your potential future returns might be. Each fund may track a different index or do better than another fund, and some indexes do better than others over time. Long-run performance is your best gauge to what you might expect in the future, but it’s no guarantee, either.
  • Expense ratio: The expense ratio shows what you’re paying for the fund’s performance on an annual basis. For funds that track the same index, such as the S&P 500, it makes little sense to pay more than you have to. Other index funds may track indexes that have better long-term performance, potentially justifying a higher expense ratio.
  • Trading costs: Some brokers offer very attractive prices when you’re buying mutual funds, even more so than the same mutual fund company itself. If you’re going with an ETF, virtually all major online brokers now allow you to trade without a commission. Also, if you’re buying a mutual fund, beware of sales loads, or commissions, which can easily lop off 1 or 2 percent of your money before it’s invested. These are easy to avoid by choosing funds carefully, such as those from Vanguard and many others.
  • Fund options: Not all brokers will offer all mutual funds, however. So you’ll need to see whether your broker offers a specific fund family. In contrast, ETFs are typically available at all brokers because they’re all traded on an exchange.
  • Convenience: It may be a lot easier to go with a mutual fund that your broker offers on its platform rather than open a new brokerage account. But going with an ETF instead of a mutual fund may also allow you to sidestep this issue.

Can an index fund investor lose everything?

Putting money into any market-based investment such as stocks or bonds means that investors could lose it all if the company or government issuing the security runs into severe trouble. However, the situation is a bit different for index funds because they’re often so diversified.

An index fund usually owns at least dozens of securities and may own potentially hundreds of them, meaning that it’s highly diversified. In the case of a stock index fund, for example, every stock would have to go to zero for the index fund, and thus the investor, to lose everything. So while it’s theoretically possible to lose everything, it doesn’t happen for standard funds.

That said, an index fund could underperform and lose money for years, depending on what it’s invested in. But the odds that an index fund loses everything are very low.

What is considered a good expense ratio?

Mutual funds and ETFs have among the cheapest average expense ratios, and the figure also depends on whether they’re investing in bonds or stocks. In 2020, the average stock index mutual fund charged 0.06 percent (on an asset-weighted basis), or $6 for every $10,000 invested. The average stock index ETF charged 0.18 percent (asset-weighted), or $18 for every $10,000 invested.

Index funds tend to be much cheaper than average funds. Compare the numbers above with the average stock mutual fund (on an asset-weighted basis), which charged 0.54 percent, or the average stock ETF, which charged 0.18 percent. While the ETF expense ratio is the same in each case, the cost for mutual funds generally is higher. Many mutual funds are not index funds, and they charge higher fees to pay the higher expenses of their investment management teams.

So anything below the average should be considered a good expense ratio. But it’s important to keep these costs in perspective and realize that the difference between an expense ratio of 0.10 percent and 0.05 percent is just $5 per year for every $10,000 invested. Still, there’s no reason to pay more for an index fund tracking the same index.

Is now a good time to buy index funds?

If you’re buying a stock index fund or almost any broadly diversified stock fund such as an S&P 500 fund, it can be a good time to buy. That’s because the market tends to rise over time, as the economy grows and corporate profits increase. In this regard, time is your best friend, because it allows you to compound your money, letting your money make money. That said, narrowly diversified index funds (such as funds focused on one industry) may do poorly for years.

Investors need to take a long-term mindset, however, and experts recommend adding money to the market regularly. You’ll take advantage of dollar cost averaging and lower your risk. A strong investing discipline can help you make money in the market over time. Investors should avoid timing the market, that is, jumping in and out of the market to capture gains and dodge losses.

Index fund FAQ

If you’re looking to get into index funds, you may still have a few more questions. Here are answers to some of the most frequently asked questions that investors have about them.

How do index funds work?

An index fund is an investment fund – either a mutual fund or an exchange-traded fund (ETF) – that is based on a preset basket of stocks, or index. This index may be created by the fund manager itself or by another company such as an investment bank or a brokerage.

These fund managers then mimic the index, creating a fund that looks as much as possible like the index, without actively managing the fund. Over time the index changes, as companies are added and removed, and the fund manager mechanically replicates those changes in the fund.

Because of this approach, index funds are considered a type of passive investing, rather than active investing where a fund manager analyzes stocks and tries to pick the best performers.

This passive approach means that index funds tend to have low expense ratios, keeping them cheap for investors getting into the market.

Some of the most well-known indexes include the S&P 500, the Dow Jones Industrial Average and the Nasdaq 100. Indexing is a popular strategy for ETFs to use, and most ETFs are based on indexes.

What sort of fees are associated with index funds?

Index funds may have a couple different kinds of fees associated with them, depending on which type of index fund:

  • Mutual funds: Index funds sponsored by mutual fund companies may charge two kinds of fees: a sales load and an expense ratio.
Sours: https://www.bankrate.com/investing/best-index-funds/

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