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Index funds are the easiest, most reliable way to start investing. They give you instant diversification, charge minimal fees, and consistently outperform most actively managed funds over the long run. If you have been sitting on the sidelines because investing feels complicated, this guide is for you.
We will cover what index funds are, break down the best options at the three biggest brokerages, and walk you through exactly how to buy your first one.
- The best index fund is the one at your existing brokerage — performance differences between FZROX, VTI, VOO, and SWPPX are tiny. Picking the “wrong” one costs you pennies per year.
- FZROX (Fidelity) is literally free at 0.00%. The catch: it only works at Fidelity and cannot transfer in-kind to another brokerage.
- VTI (Vanguard, 0.03%) is the most portable option — it works at any brokerage and can always transfer in-kind.
- All 7 funds on this list are excellent. Analysis paralysis costs you more in missed growth than the fee difference between them ever will.
- Start with a Roth IRA if you have earned income. The tax-free growth over decades is more valuable than which specific fund you pick.
What Are Index Funds? (The Quick Version)
An index fund is a type of investment that tracks a specific market index — like the S&P 500 or the total US stock market. Instead of a fund manager picking individual stocks (and charging you heavily for it), an index fund simply holds all the stocks in a given index.
The result: broad diversification, low fees, and historically strong returns. Warren Buffett himself has repeatedly recommended index funds for most investors. For the difference between index funds and ETFs, see our index funds vs ETFs guide.
Types of Index Funds You Should Know
Total US Stock Market Funds hold virtually every publicly traded US company — from mega-caps like Apple and Microsoft down to small-cap stocks. You get the entire domestic market in one fund. Best for: beginners who want the simplest possible one-fund approach to US stocks.
S&P 500 Index Funds track the 500 largest US companies by market cap. These 500 companies represent roughly 80% of the total US market value. Best for: investors who want large-cap US exposure with the longest track record. See our full S&P 500 index funds guide.
International Index Funds cover stocks outside the US — developed markets (Europe, Japan) and emerging markets (China, India). Adding international exposure reduces reliance on any single economy. Best for: building a globally diversified portfolio alongside a US fund.
Best Index Funds at Fidelity
Fidelity offers zero-minimum funds, a clean app, and some of the lowest expense ratios in the industry. Their ZERO funds are genuinely free.
FZROX: Fidelity ZERO Total Market Index Fund
| Expense Ratio | 0.00% |
| Minimum | $0 |
| Tracks | Fidelity US Total Investable Market Index |
| Type | Mutual Fund |
FZROX is literally a free index fund. The expense ratio is 0.00%. Fidelity uses its own proprietary index (rather than a licensed one like CRSP) to eliminate fees — performance tracks very closely to the total US market. Catch: only works at Fidelity and cannot transfer in-kind to another brokerage (you would need to sell first). If you are committed to Fidelity, this is unbeatable.
FXAIX: Fidelity 500 Index Fund
| Expense Ratio | 0.015% |
| Minimum | $0 |
| Tracks | S&P 500 |
| Type | Mutual Fund |
FXAIX is Fidelity’s S&P 500 fund at 0.015% — $1.50 per year on a $10,000 investment. One of the cheapest S&P 500 options anywhere. Massive assets under management ($700B+) and a long track record. Unlike FZROX, it tracks a standard S&P 500 index and can transfer in-kind.
Best Index Funds at Vanguard
Vanguard invented index fund investing. Their funds remain some of the most trusted in the world, and the unique client-owned structure means there is no profit motive to push expensive products.
VTI: Vanguard Total Stock Market ETF
| Expense Ratio | 0.03% |
| Minimum | $0 (fractional shares) |
| Tracks | CRSP US Total Market Index |
| Type | ETF |
VTI is one of the most widely held ETFs in existence. It covers the entire US stock market (3,600+ stocks) at 0.03%. As an ETF, it works at any brokerage and transfers in-kind. The gold standard for total market exposure.
VTSAX: Vanguard Total Stock Market Index Fund Admiral Shares
| Expense Ratio | 0.04% |
| Minimum | $3,000 |
| Tracks | CRSP US Total Market Index |
| Type | Mutual Fund |
VTSAX is the mutual fund version of VTI — same index, slightly higher fee (0.04% vs 0.03%), priced once per day at market close. The $3,000 minimum is the main barrier. Many long-term Vanguard investors prefer VTSAX for automatic investing since mutual funds allow exact dollar contributions.
VOO: Vanguard S&P 500 ETF
| Expense Ratio | 0.03% |
| Minimum | $0 (fractional shares) |
| Tracks | S&P 500 |
| Type | ETF |
VOO is one of the largest funds in the world by assets ($600B+). S&P 500 exposure at 0.03%, works at any brokerage, transfers in-kind. The classic choice for buy-and-hold investors who want the most-watched US benchmark.
Best Index Funds at Schwab
Schwab funds are competitive on price, have $0 minimums, and work seamlessly within the Schwab ecosystem.
SWTSX: Schwab Total Stock Market Index Fund
| Expense Ratio | 0.03% |
| Minimum | $0 |
| Tracks | Dow Jones US Total Stock Market Index |
| Type | Mutual Fund |
SWTSX is Schwab’s answer to VTSAX — total US market exposure at 0.03% with no minimum. Perfect for Schwab investors who want to invest exact dollar amounts via automatic contributions without the $3,000 barrier.
SWPPX: Schwab S&P 500 Index Fund
| Expense Ratio | 0.02% |
| Minimum | $0 |
| Tracks | S&P 500 |
| Type | Mutual Fund |
SWPPX at 0.02% is one of the cheapest S&P 500 funds available after FZROX. Zero minimum, strong track record. For Schwab investors who prefer the S&P 500, this is the obvious pick.
Find Your Fund: Which One Should You Buy?
Answer two questions to get a specific recommendation:
Find My Index Fund
Two questions. One specific answer.
Step 1: Where do you invest (or plan to open an account)?
How to Choose: 4 Factors That Actually Matter
1. Where do you already have an account? This is the biggest practical consideration. If you have a Fidelity account, buy Fidelity funds. At Vanguard, buy Vanguard funds. The performance differences between equivalent funds are negligible — do not overthink this.
2. Total market vs S&P 500. Both are excellent. Total market gives you slightly more diversification (mid-cap and small-cap stocks alongside large-cap). S&P 500 has the longer track record and marginally lower fees at some brokerages. Over any long period, their returns are very similar — within 0.1 to 0.2% annually. The choice matters far less than starting.
3. Mutual fund vs ETF. Mutual funds let you invest exact dollar amounts and are easier to automate. ETFs trade like stocks, are slightly more tax-efficient in taxable accounts, and work at any brokerage. In a Roth IRA, the tax efficiency difference disappears. Both approaches work well for long-term investors.
4. Expense ratios matter, but do not obsess. All 7 funds below are excellent. On a $100,000 portfolio, the difference between FZROX (0.00%) and VTI (0.03%) is $30 per year. The difference between VTI and an actively managed fund at 1.00% is $970 per year — that is where it matters. Stay under 0.10% on your core holdings and you are in great shape.
Complete Fund Comparison
Filter by brokerage to see what is available at your platform:
How to Buy Your First Index Fund: Step by Step
Step 1: Open a brokerage account. Fidelity, Vanguard, or Schwab. For retirement investing, open a Roth IRA. For non-retirement goals, open a taxable brokerage account. Takes about 15 minutes.
Step 2: Fund your account. Link your bank account and transfer money. Most brokerages process transfers in 1 to 3 business days.
Step 3: Search for the fund. Use the ticker symbol (FZROX, VTI, SWPPX, etc.) in your brokerage’s search bar. Confirm the fund name before buying.
Step 4: Place your order. For mutual funds, enter the dollar amount. For ETFs, enter the number of shares (or dollar amount if fractional shares are available). Market order for simplest execution.
Step 5: Set up automatic investments. This is the most important step. Schedule recurring contributions on payday so you invest consistently without thinking about it. This dollar-cost averaging approach smooths out market volatility over time.
Step 6: Do not touch it. Do not check daily. Do not panic-sell during dips. The whole point of index fund investing is long-term compounding. Let it work.
Frequently Asked Questions
What is the difference between an index fund and an ETF?
An ETF is a type of index fund that trades on a stock exchange like a stock — you can buy and sell it during market hours at real-time prices. A traditional index fund (mutual fund) prices once per day at market close and lets you invest exact dollar amounts. Both track indexes, both have low fees, and both work well for long-term investing. VTI is an ETF. VTSAX is a mutual fund. They track the same index at nearly the same cost — the difference is how they trade and the minimum investment.
Can I own index funds from different brokerages?
Not within the same account. Your Fidelity account can only hold Fidelity funds (and some third-party ETFs like VTI), while your Vanguard account holds Vanguard funds. However, you can have accounts at multiple brokerages — for example, a Roth IRA at Fidelity (holding FZROX) and a 401(k) at Vanguard (holding VTSAX). Vanguard ETFs like VTI and VOO can be purchased at any major brokerage since they are exchange-traded.
Should I buy FZROX or VTI?
If you invest exclusively at Fidelity and never plan to leave, FZROX (0.00%) wins on cost. If you might switch brokerages someday, VTI (0.03%) is more portable — it transfers in-kind to any brokerage. FZROX cannot transfer in-kind, meaning you would need to sell (potentially triggering capital gains in a taxable account), wait, and repurchase. The 0.03% fee difference on $50,000 is $15 per year. For most people committed to Fidelity, FZROX is fine. For everyone else, VTI or FSKAX (Fidelity’s 0.015% fund that does transfer).
Is SWPPX better than FXAIX?
Marginally cheaper: SWPPX charges 0.02% vs FXAIX at 0.015% — a $0.50 difference per $10,000 per year. Both track the S&P 500, both have $0 minimums, both are excellent. The only meaningful difference is which brokerage you are using. At Schwab, use SWPPX. At Fidelity, use FXAIX. Never switch brokerages for a 0.005% fee difference.
What happens to my FZROX if I leave Fidelity?
FZROX is a Fidelity proprietary fund and cannot transfer in-kind to another brokerage. If you initiate an ACATS transfer to Schwab or Vanguard, Fidelity will liquidate your FZROX position and send cash. In a Roth IRA, this is not a problem — no taxes on the sale. In a taxable brokerage account, selling triggers capital gains taxes on any gains. If you are investing in a taxable account and might switch brokerages, use FSKAX (0.015%) instead of FZROX — it tracks a standard index and transfers in-kind.
Can I start with just $1?
Yes. Fidelity, Schwab, and most major brokerages support fractional shares or $0-minimum mutual funds. At Fidelity, FZROX has $0 minimum and accepts any dollar amount. At Vanguard, VTI supports fractional share purchasing through automatic investment plans. Schwab’s SWTSX and SWPPX have $0 minimums. The only fund with a meaningful minimum is VTSAX ($3,000) — if you are under that, use VTI instead.
Do index funds pay dividends?
Yes. Most stock index funds pay quarterly dividends. VTI currently yields approximately 1.3 to 1.5% annually. FZROX and FXAIX pay quarterly dividends too. In a Roth IRA or 401(k), dividends reinvest tax-free and compound your returns. In a taxable brokerage account, dividends are taxable in the year they are paid — qualified dividends at a lower rate (0%, 15%, or 20% depending on income). Most brokerages let you set up automatic dividend reinvestment (DRIP) to put dividends back to work immediately.
Should I invest in the total market or just the S&P 500?
Both are excellent choices and the debate is mostly academic. The S&P 500 covers the 500 largest companies (roughly 80% of US market value). The total market adds 3,000+ mid-cap and small-cap companies. Over the past 20 years, VTI (total market) and VOO (S&P 500) have returned within 0.1 to 0.2% of each other annually. The total market provides slightly broader diversification; the S&P 500 has a longer track record and marginally lower fees at some brokerages. Pick either and never look back — this is not a decision worth spending more than 5 minutes on.
Final Thoughts
The best index fund for beginners is the one you actually buy and hold. Every fund on this list is excellent. The differences between them are tiny — the finder above makes them even clearer.
What matters far more than picking the “perfect” fund: opening an account today, setting up automatic contributions, and leaving the investments alone for decades. A $100/month investment in any of these funds started today will outperform a “perfectly optimized” portfolio started two years from now. Compound growth needs time above all else.
Pick a fund, set up automatic contributions, and get your money working for you.
Open a brokerage account and buy your first index fund
Next steps:
- Want a complete portfolio around these funds? Read our 3-fund portfolio guide — add VXUS or FTIHX for international, BND or FXNAX for bonds.
- Want the details on VTI and VOO specifically? Read our S&P 500 index funds guide.
- Want automation instead of DIY? Read our robo-advisor comparison — some options buy and manage these exact funds for you.
