Index funds are the most proven, lowest-effort way to build long-term wealth. Here are the best ones available to Americans right now — broken down by expense ratio, holdings, performance, and who each one is best suited for.
- What is an index fund?
- Why index funds beat most active investors
- VOO — Vanguard S&P 500 ETF
- VTI — Vanguard Total Stock Market ETF
- FXAIX — Fidelity 500 Index Fund
- SCHB — Schwab U.S. Broad Market ETF
- VXUS — Vanguard Total International Stock ETF
- BND — Vanguard Total Bond Market ETF
- VT — Vanguard Total World Stock ETF
- FZROX — Fidelity ZERO Total Market Index Fund
- Side-by-side comparison
- Which fund is right for you
- How to buy your first index fund
- Mistakes beginners make
- FAQ
If there's one investment strategy that experts across every school of thought agree on, it's this: low-cost index funds, held long-term, beat the vast majority of actively managed funds. Warren Buffett recommends them. John Bogle built Vanguard around them. And decades of data back them up.
For a beginner, the decision isn't whether to invest in index funds — it's which ones to choose. This guide answers that question clearly, honestly, and without the jargon.
"Don't look for the needle in the haystack. Just buy the haystack." — John Bogle, founder of Vanguard and father of index investing
What is an index fund?
An index fund is a type of investment fund designed to replicate the performance of a specific market index — like the S&P 500, the total U.S. stock market, or the global stock market. Instead of a fund manager picking individual stocks (and charging high fees for the privilege), an index fund simply buys all — or a representative sample of — the stocks in that index.
The result: broad diversification, very low costs, and returns that closely match the overall market. No stock-picking, no guesswork, no drama.
ETF vs. mutual fund — what's the difference?
Index funds come in two forms: ETFs (Exchange-Traded Funds) and mutual funds. ETFs trade on a stock exchange like individual stocks — you can buy one share at any time during market hours. Mutual funds are priced once per day after markets close. For beginners, ETFs are slightly more flexible, but both work equally well for long-term investing. The funds on this list include both types.
Why index funds beat most active investors
Over any 15-year period, roughly 85–92% of actively managed large-cap U.S. funds underperform their benchmark index, according to S&P's SPIVA reports. The reasons are simple: active funds charge higher fees, and those fees compound against you over time. A 1% annual fee seems small — but over 30 years on a $50,000 investment, it can cost you over $120,000 in lost returns.
By investing in a simple S&P 500 index fund, you will automatically outperform 9 out of 10 professional fund managers over the long run — simply by keeping costs low and staying invested. No skill, research, or effort required.
1. VOO — Vanguard S&P 500 ETF
VOO is the gold standard beginner index fund. It tracks the S&P 500 — the 500 largest publicly traded U.S. companies — and is the single most recommended fund for new investors. It's the fund Warren Buffett has publicly said he wants used for his wife's inheritance. That endorsement alone tells you everything.
What you own: A slice of Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta, and 497 other companies — weighted by market cap. The top 10 holdings represent about 35% of the fund. Dividends are paid quarterly and can be automatically reinvested.
2. VTI — Vanguard Total Stock Market ETF
VTI takes VOO one step further. Instead of just the 500 largest companies, VTI owns essentially the entire U.S. stock market — about 3,700 companies, including mid-cap and small-cap stocks that VOO doesn't include. More diversification at the same rock-bottom expense ratio.
VOO vs. VTI: The performance difference over 10 years is minimal — usually within 0.5% of each other annually. VTI gives you broader exposure to smaller companies, which can outperform in certain market cycles. Both are excellent choices. Many investors simply pick one and hold it for decades.
3. FXAIX — Fidelity 500 Index Fund
FXAIX is Fidelity's version of a S&P 500 index fund — and it gives VOO a genuine run for its money. With a 0.015% expense ratio (half of VOO's already-tiny fee), FXAIX is one of the cheapest index funds on earth. It tracks the same S&P 500 index with virtually identical performance. The catch: it's a mutual fund, so it can only be purchased directly through Fidelity.
Why it stands out: No minimum investment and a $1 minimum contribution makes FXAIX ideal for beginners with smaller amounts to invest. The practical difference in returns vs. VOO is negligible — we're talking about fractions of a penny per dollar invested annually.
4. SCHB — Schwab U.S. Broad Market ETF
SCHB is Schwab's answer to VTI — a total U.S. stock market ETF covering roughly 2,500 companies at a near-zero expense ratio. Performance closely mirrors VTI. If you bank and invest through Schwab, SCHB is your natural home base for a core stock market holding.
Practical note: SCHB has one of the lowest share prices among broad market ETFs, making it easy to invest small amounts without needing fractional shares. Schwab also offers fractional share investing (called "Schwab Stock Slices") if you want to start with even less.
5. VXUS — Vanguard Total International Stock ETF
VOO and VTI only cover U.S. companies. VXUS covers everything else — over 8,000 companies across developed and emerging markets in Europe, Asia, and beyond. International diversification reduces your dependence on the U.S. economy alone, which makes up roughly 60% of global market cap despite containing only 4% of the world's population.
The classic pairing: Many investors hold VTI + VXUS together for total global market coverage. A common allocation is 70–80% VTI and 20–30% VXUS, which roughly mirrors global market weights. International stocks have underperformed the U.S. over the past 15 years — but valuation cycles turn, and geographic diversification has historically reduced long-term volatility.
6. BND — Vanguard Total Bond Market ETF
Stocks get most of the attention, but bonds belong in a complete beginner portfolio too — especially as you approach retirement or want to reduce volatility. BND holds over 10,000 U.S. bonds including government, corporate, and mortgage-backed securities. It pays monthly income and provides a ballast when stock markets drop sharply.
How much to hold: A common rule of thumb is to hold your age as a percentage in bonds (e.g., 25 years old = 25% bonds). A simpler modern approach: hold 0–10% bonds in your 20s and 30s, gradually increasing as you approach retirement. BND is the most straightforward way to add bond exposure without picking individual bonds.
7. VT — Vanguard Total World Stock ETF
If you want total global stock market exposure in a single fund — the simplest possible portfolio — VT is it. It holds over 9,500 companies across U.S. and international markets, weighted by global market cap. One fund, the whole world. The trade-off is a slightly higher expense ratio than holding VTI and VXUS separately.
The one-fund portfolio: For investors who want maximum simplicity — one fund, one purchase, total diversification — VT is the answer. You own a slice of nearly every significant publicly traded company on earth. Rebalancing happens automatically as market caps shift. Hard to argue with as a lifelong core holding.
8. FZROX — Fidelity ZERO Total Market Index Fund
FZROX charges exactly $0 in annual fees — a 0.00% expense ratio. It tracks the total U.S. stock market with no minimum investment and no cost whatsoever. The catch: it's exclusive to Fidelity and uses Fidelity's proprietary index rather than a standard one. For long-term Fidelity investors, that distinction is largely academic.
The fine print: FZROX cannot be transferred to another brokerage — if you ever leave Fidelity, you'd need to sell and rebuy in your new account (a potential tax event in a taxable account). For Roth IRA investors who plan to stay at Fidelity long-term, this concern is minimal. In a taxable account, VTI or FXAIX may be slightly more portable.
Side-by-side comparison
Here's how all eight funds stack up on the metrics that matter most to a beginner investor.
| Fund | Expense Ratio | Coverage | 10-Yr Return | Min. Buy |
|---|---|---|---|---|
| VOO | 0.03% | U.S. Large-Cap (S&P 500) | ~12.8% | 1 share |
| VTI | 0.03% | Total U.S. Market | ~12.3% | 1 share |
| FXAIX | 0.015% | U.S. Large-Cap (S&P 500) | ~12.8% | $1 |
| SCHB | 0.03% | Total U.S. Market | ~12.2% | 1 share (~$28) |
| VXUS | 0.07% | Total International | ~5.4% | 1 share |
| BND | 0.03% | Total U.S. Bond Market | ~1.8% | 1 share |
| VT | 0.07% | Total World (U.S. + Int'l) | ~9.8% | 1 share |
| FZROX | 0.00% | Total U.S. Market | ~12.1% | $1 |
Don't obsess over which fund is fractionally cheaper or 0.3% better in returns. The most important variables are: starting early, contributing consistently, and not selling during downturns. Any fund on this list will serve you far better than inaction while you keep researching.
Which index fund is right for you
The best index fund is the one you'll actually buy and hold. Use this guide to match your situation to the right starting point.
How to buy your first index fund
Buying an index fund takes under 15 minutes once you have a brokerage account. Here's the step-by-step:
- Choose a brokerage. Fidelity, Vanguard, and Schwab are the top three for index fund investors. All are free to open, have no account minimums, and offer commission-free ETF trading. Fidelity is often recommended for beginners due to its $1 investment minimums on mutual funds.
- Open your account type. If you're investing for retirement, open a Roth IRA first — your money grows completely tax-free. If you've already maxed your IRA ($7,000 limit in 2026), open a regular taxable brokerage account.
- Fund your account. Link your bank account and transfer money. ACH transfers typically take 1–3 business days to settle.
- Search for the fund ticker. Type "VOO," "VTI," or whichever fund you've chosen into the search bar.
- Place your order. For ETFs, select "Market Order" to buy at the current price. For mutual funds like FXAIX, enter the dollar amount you want to invest.
- Set up automatic contributions. The single most powerful step. Set a recurring monthly transfer — even $50 — so investing becomes automatic. Dollar-cost averaging over time smooths out market volatility and removes emotion from the process.
Mistakes beginners make with index funds
- Buying too many funds that overlap. VOO and VTI are not meaningfully different — owning both doesn't add diversification. Pick one U.S. stock fund and stick with it.
- Panic selling during market drops. The S&P 500 drops 10%+ in any given year about once every two years. Drops of 20–30% happen every decade or so. These are normal — and they're buying opportunities, not emergencies.
- Waiting for the "right time" to invest. Time in the market beats timing the market. Studies consistently show that lump-sum investing outperforms waiting for a dip in about 68% of cases.
- Ignoring tax-advantaged accounts. Always max your Roth IRA before investing in a taxable account. $7,000/year in a Roth IRA grows completely tax-free for decades.
- Constantly switching funds. Every unnecessary fund switch in a taxable account is a potential taxable event. Choose a fund, automate contributions, and leave it alone.
- Chasing last year's top-performing fund. Past performance does not predict future returns. The fund that returned 40% last year often underperforms in the following years. Stick to total market funds.
The only index fund strategy you actually need
Open a Roth IRA at Fidelity or Vanguard. Buy VOO or VTI. Set up an automatic monthly contribution of whatever you can afford — $50, $100, $500. Reinvest dividends. Do not check it more than once a quarter. Do not sell when markets drop. Repeat for 20–30 years. That's it. That's the whole strategy. Everything else is noise.
FAQ
Should I invest in VOO or VTI?
Both are excellent choices and the long-term performance difference is minimal. VOO tracks only the S&P 500 (large caps), while VTI adds mid and small-cap exposure for broader diversification. If you can only pick one, either will serve you well. Many experienced investors simply pick one and hold it for life without ever switching.
How much money do I need to start investing in index funds?
As little as $1 with Fidelity mutual funds (FXAIX, FZROX). For ETFs like VOO and VTI, you need enough to buy one share — though most major brokerages now offer fractional share investing, so you can invest any dollar amount. There is no meaningful barrier to entry in 2026.
Can I lose all my money in an index fund?
A broad market index fund like VTI or VOO would only go to zero if every major publicly traded U.S. company simultaneously became worthless — an event that would represent a total collapse of the U.S. economy. For practical purposes, this is not a realistic risk. What is realistic: your account value will drop during recessions and bear markets. That's why a long time horizon (10+ years) is essential.
Is it better to invest a lump sum or monthly contributions?
If you have a lump sum, investing it all at once historically outperforms spreading it out over time in about two-thirds of cases. However, for most people who are investing regular income, automatic monthly contributions (dollar-cost averaging) is the right strategy because it removes timing anxiety and builds the habit of consistent investing.
What's the difference between an index fund and an ETF?
An ETF (like VOO or VTI) trades on a stock exchange throughout the day like a stock. An index mutual fund (like FXAIX or FZROX) is priced once per day after markets close. For long-term investors, the practical difference is minimal. Both can be excellent index funds — the distinction is mostly about how they're bought and sold.
Should I put my index funds in a Roth IRA or regular brokerage account?
Always maximize tax-advantaged accounts first. A Roth IRA lets your investments grow completely tax-free — you'll never pay a cent in taxes on dividends or gains inside it. The 2026 contribution limit is $7,000/year ($8,000 if you're 50+). Only invest in a taxable brokerage account after you've maxed your Roth IRA for the year.
Wealthly Read is for informational purposes only and does not constitute financial advice. Past performance of any fund does not guarantee future results. All investing involves risk, including possible loss of principal. Consult a licensed financial advisor before making investment decisions.