Best Index Funds

Low fees and good service makes these index funds great choices

Index mutual funds provide an incredibly effective way to invest to meet your long-term financial goals. When comparing index mutual funds, you do not need to worry about how the fund is managed, as an index fund will simply own all the stocks that fall within the index it is tracking.

How then do you determine the best index mutual funds? You look at the funds’ expenses and the level of service the company provides. Below is a list of four companies that offer index funds, all with low costs and great service.

1
Vanguard

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Index funds offer an incredibly effective way to invest.. Andrew Unangst/ Photographer's Choice/ Getty Images

Vanguard came out with the very first index mutual fund in 1976, the Vanguard 500 Index Fund, and has continued to be a leader in the index fund industry ever since, which is why they are at the top of the best index fund list. As a firm, Vanguard is committed to providing low cost investment options. As they say on their website,

“You can't control market performance, but you can control how much you pay for your investments.”

With over 100 mutual funds to choose from, including some great all-in-one funds and retirement income funds (which both allow you to invest in a diversified portfolio with a single investment) you are bound to find investments that meet your goals.

2
iShares ETFs

Tape measure with hundred dollar bills.
With index funds, your savings on fees will add up.. BartSadowski/E+/GettyImages

iShares offers a variation of a mutual fund called an exchange traded fund. Exchange traded funds trade like a stock, with a current share price that changes throughout the day. The iShares website provides some great educational tools including a comparison of exchange traded funds versus open end index funds versus actively managed funds. You can learn more by reading:

  • ETF vs Index fund vs Active Managed Fund
  • Fundamentals of iShares ETFs

iShares offers a large selection of funds. You can use their index funds to invest in a single country’s market, like China or India, or buy the emerging markets sector as a whole. They have index funds that cover almost any asset class you could desire, including real estate and commodities.

3
Charles Schwab

Portfolio analysis online and printed.
Managing your portfolio doesn't have to be expensive.. Andrew Brookes/Cultura/Getty Images

Charles Schwab does not offer a large selection of index funds, but the fund expenses are so incredibly low (their S&P 500 Index fund has an expense ratio of .09), that I had to include them on the list. As they state on their website,

“Schwab’s Equity Index Funds are among the lowest-cost index funds around. Fund operating expenses are well below the industry average, and there are no loads or transaction fees.”

Their funds are used within the Schwab Intelligent Portfolios, which offer a low cost, low maintenance solution to managing your investments.

4
DFA (Dimensional Fund Advisors)

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Your nest egg is likely to grow even faster when you use passive funds.. Elizabeth Waugh/Photolibrary/Getty Images

DFA funds do not actually track an index, as they have their own way of defining certain sectors of the market. The funds are not actively managed, focus on low costs, and like an index fund, they don’t believe you can “beat” the market.

Dimensional Funds are designed around years of academic research. They say on their website

“There is a model of investing based not on speculation but on the science of capital markets. Decades of research guide the way.”

DFA funds are only available inside pension plans or through fee-only advisors. You can search on their website for an advisor who subscribes to their academic research and follows their philosophy.

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