Index funds are a popular choice among investors for their instant diversification, returns that have proved more reliable than those of actively managed funds and rock-bottom fees that keep more of your cash invested.
Index funds are often synonymous with “low-cost” funds because of their low expense ratios, or the percentage of your investment that goes toward paying the annual costs of maintaining the fund.
By far, the most popular class of index funds are linked to the S&P 500 — in 2018, nearly 30% of all investor cash in index funds tracked that benchmark index, according to the Investment Company Institute. Here are some of the best index funds pegged to the S&P 500.
Best index funds with low costs
Vanguard 500 Index Fund Admiral Shares (VFIAX)
Also known as the Vanguard S&P 500 Index fund, this fund was founded in 1976 and is the granddaddy of all index funds. Like the other S&P 500 funds on this list, this fund gives exposure to 500 of the largest U.S. companies, which make up about 75% of the U.S. stock market’s total value.
Minimum investment: $3,000. Expense ratio: 0.04%.
Schwab S&P 500 Index Fund (SWPPX)
As research firm Morningstar notes, this is one of the cheapest and most accessible S&P 500-tracking funds out there. Launched in 1997, this Schwab fund charges a scant 0.02% expense ratio and requires no minimum investment, making it attractive for investors concerned about costs.
Minimum investment: No minimum. Expense ratio: 0.02%.
Fidelity 500 Index Fund (FXAIX)
Founded in 1988 (formerly known as Institutional Premium Class fund), Fidelity removed this fund’s investment minimum last year, so investors with any budget size can get into the low-cost index fund action.
Minimum investment: No minimum. Expense ratio: 0.015%.
Fidelity ZERO Large Cap Index (FNILX)
In the race for the lowest of the low-cost index funds, this Fidelity fund made news last summer by being among the first to charge no annual expenses, meaning investors can keep all their cash invested for the long run.
Minimum investment: No minimum. Expense ratio: 0.0%.
T. Rowe Price Equity Index 500 Fund (PREIX)
Founded in 1990, the fund’s expense ratio is competitive with other providers, but the $2,500 minimum may be steep for beginning investors.
Minimum investment: $2,500. Expense ratio: 0.02%.
Other considerations when shopping low-cost index funds
- Any index fund you buy should closely match the performance of the index it mirrors — for example, if the S&P 500 rises 10% over a year, your S&P 500 index fund should rise in line. Learn more about how index funds work.
- Expense ratios are just one cost to know. Another is the actual cost to purchase index fund shares — known as its NAV (net asset value) — which fluctuates based on market value. See fund companies or brokers for latest index fund share prices. See this primer to understand investment fees and expenses.
- There are many more types of index funds than ones linked to the S&P 500 (just as there are many more publicly traded assets than America’s 500 largest companies). Other index funds track small or midsize companies, different geographical areas or different industries. You can learn more about fund types in our index fund investing guide.
- Relatedly, owning one S&P 500-linked index fund in your portfolio may be good, but owning two would be redundant. If you’re buying a second index fund, mix it up. Learn more about building simple portfolios to grow your wealth.
If you don’t already have one, you’ll need to open a brokerage account to buy and trade index funds (or stocks, bonds or any other publicly traded investment). You don’t need to open an account with the provider that runs the fund — many providers offer a strong selection of index funds.
Need help deciding? Here are some brokers we recommend for index funds and other types of mutual funds:
And here’s our complete list of best brokers for mutual funds.