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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’ve been sitting on the sidelines because investing feels complicated, this guide is for you.
We’ll 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.
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. If you want to go deeper on the difference between index funds and ETFs, check out our breakdown of index funds vs. ETFs.
Now let’s talk about which ones to actually buy.
Types of Index Funds You Should Know
Before we get to specific picks, here are the three main categories you’ll encounter.
Total US Stock Market Funds
These funds hold virtually every publicly traded US company, from mega-caps like Apple and Microsoft down to small-cap stocks. You get exposure to the entire domestic market in a single fund.
Best for: Beginners who want the simplest possible one-fund approach to US stocks.
S&P 500 Index Funds
These track the 500 largest US companies by market capitalization. The S&P 500 is the most widely followed stock market benchmark, and for good reason. These 500 companies represent roughly 80% of the total US market value.
For a deeper look, see our guide on S&P 500 index funds explained.
Best for: Investors who want large-cap US exposure with a long track record.
International Index Funds
These cover stocks outside the US, including developed markets (Europe, Japan, Australia) and sometimes emerging markets (China, India, Brazil). Adding international exposure reduces your reliance on any single economy.
Best for: Building a globally diversified portfolio. Pairs well with a US stock fund.
Best Index Funds at Fidelity
Fidelity has become a favorite among young investors, and for good reason. They offer zero-minimum funds, a clean app, and some of the lowest expense ratios in the industry. Read our full Fidelity review for a detailed look at the platform.
FZROX: Fidelity ZERO Total Market Index Fund
| Detail | Info |
|---|---|
| Expense Ratio | 0.00% |
| Minimum Investment | $0 |
| What It Tracks | Fidelity US Total Investable Market Index |
| Fund Type | Mutual Fund |
FZROX is, quite literally, a free index fund. The expense ratio is 0.00%. Fidelity uses its own proprietary index rather than a licensed one (which is how they eliminate fees), but the performance tracks very closely to the total US market. If you’re investing through Fidelity and want broad US exposure at zero cost, this is hard to beat.
FXAIX: Fidelity 500 Index Fund
| Detail | Info |
|---|---|
| Expense Ratio | 0.015% |
| Minimum Investment | $0 |
| What It Tracks | S&P 500 |
| Fund Type | Mutual Fund |
Prefer to stick with the classic S&P 500? FXAIX is Fidelity’s version, and it’s dirt cheap at 0.015%. On a $10,000 investment, that’s $1.50 per year in fees. This fund has a long track record and massive assets under management.
Best Index Funds at Vanguard
Vanguard pioneered index fund investing. Founder Jack Bogle literally invented the first index fund for individual investors. Their funds remain some of the most popular and trusted in the world.
VTI: Vanguard Total Stock Market ETF
| Detail | Info |
|---|---|
| Expense Ratio | 0.03% |
| Minimum Investment | Price of 1 share (or $1 with fractional shares) |
| What It Tracks | CRSP US Total Market Index |
| Fund Type | ETF |
VTI is one of the most widely held ETFs in existence. It covers the entire US stock market and charges just 0.03%. Because it’s an ETF, you can buy and sell it throughout the trading day, and fractional shares make it accessible at any budget.
VTSAX: Vanguard Total Stock Market Index Fund Admiral Shares
| Detail | Info |
|---|---|
| Expense Ratio | 0.04% |
| Minimum Investment | $3,000 |
| What It Tracks | CRSP US Total Market Index |
| Fund Type | Mutual Fund |
VTSAX is the mutual fund version of VTI. The main difference: it has a $3,000 minimum investment, and it’s priced once per day at market close. Many long-term investors prefer VTSAX for automatic investing since mutual funds let you invest exact dollar amounts rather than buying whole or fractional shares.
VOO: Vanguard S&P 500 ETF
| Detail | Info |
|---|---|
| Expense Ratio | 0.03% |
| Minimum Investment | Price of 1 share (or $1 with fractional shares) |
| What It Tracks | S&P 500 |
| Fund Type | ETF |
VOO is Vanguard’s S&P 500 ETF and one of the largest funds in the world. At 0.03%, fees are negligible. If you want straightforward large-cap US exposure through Vanguard, VOO is the go-to.
Best Index Funds at Schwab
Charles Schwab rounds out the “big three” brokerages for index fund investors. Their funds are competitive on price and have no minimums.
SWTSX: Schwab Total Stock Market Index Fund
| Detail | Info |
|---|---|
| Expense Ratio | 0.03% |
| Minimum Investment | $0 |
| What It Tracks | Dow Jones US Total Stock Market Index |
| Fund Type | Mutual Fund |
SWTSX gives you total US market exposure at 0.03% with no minimum investment. It’s Schwab’s answer to VTSAX, but without the $3,000 barrier to entry. A great option for beginners investing smaller amounts.
SWPPX: Schwab S&P 500 Index Fund
| Detail | Info |
|---|---|
| Expense Ratio | 0.02% |
| Minimum Investment | $0 |
| What It Tracks | S&P 500 |
| Fund Type | Mutual Fund |
SWPPX is Schwab’s S&P 500 fund, and at 0.02%, it’s one of the cheapest S&P 500 options available anywhere. Zero minimum, strong performance, low fees. Simple as that.
How to Choose the Right Index Fund
With all these options, how do you actually decide? Here are the factors that matter.
1. Where Do You Already Have an Account?
This is the biggest practical consideration. If you have a Fidelity account, buy Fidelity funds. If you’re at Vanguard, buy Vanguard funds. The performance differences between equivalent funds at different brokerages are negligible. Don’t overthink this.
2. Total Market vs. S&P 500
Honestly? Both are excellent choices. The total market funds give you slightly more diversification (including mid-cap and small-cap stocks), but the S&P 500 funds have marginally lower fees at some brokerages. Over any long time period, their returns are very similar.
If you’re going to build a diversified portfolio, consider pairing a US fund with international and bond exposure. Our guide on how to build a 3-fund portfolio walks you through exactly how to do this.
3. Mutual Fund vs. ETF
Both are valid. Here’s the quick breakdown:
- Mutual funds let you invest exact dollar amounts and are easier to automate. Great for set-it-and-forget-it investing.
- ETFs trade like stocks, are slightly more tax-efficient in taxable accounts, and often have lower minimums. Great for flexible buying.
4. Expense Ratios Matter (But Don’t Obsess)
The expense ratio is the annual fee a fund charges, expressed as a percentage of your investment. The SEC explains expense ratios in detail if you want the full picture. Lower is better.
Here’s a concrete example. On a $100,000 portfolio:
- 0.00% expense ratio (FZROX): $0/year
- 0.03% expense ratio (VTI): $30/year
- 0.50% expense ratio (typical active fund): $500/year
- 1.00% expense ratio (expensive active fund): $1,000/year
Over 30 years, that 1% fee can eat hundreds of thousands of dollars in returns. Stick with funds under 0.10%, and you’re in great shape. All the funds listed in this guide qualify.
How to Buy Your First Index Fund: Step by Step
Ready to invest? Here’s exactly what to do.
Step 1: Open a brokerage account. If you don’t have one yet, open an account at Fidelity, Vanguard, or Schwab. For retirement investing, open a Roth IRA. For non-retirement goals, open a taxable brokerage account. This takes about 15 minutes online.
Step 2: Fund your account. Link your bank account and transfer money in. Most brokerages process transfers in 1 to 3 business days.
Step 3: Search for the fund. Use the ticker symbol (like FZROX, VTI, or SWPPX) in your brokerage’s search bar.
Step 4: Place your order. For mutual funds, enter the dollar amount you want to invest. For ETFs, enter the number of shares (or dollar amount if fractional shares are available). Select “market order” for the simplest execution.
Step 5: Set up automatic investments. This is the most important step. Schedule recurring contributions on payday so you’re investing consistently without thinking about it. This strategy, called dollar-cost averaging, helps smooth out market volatility over time.
Step 6: Don’t touch it. Seriously. Don’t check your portfolio daily. Don’t panic-sell during dips. The whole point of index fund investing is long-term compounding. Let it work.
Quick Comparison Table
| Fund | Brokerage | Type | Expense Ratio | Minimum | Tracks |
|---|---|---|---|---|---|
| FZROX | Fidelity | Mutual Fund | 0.00% | $0 | Total US Market |
| FXAIX | Fidelity | Mutual Fund | 0.015% | $0 | S&P 500 |
| VTI | Vanguard | ETF | 0.03% | ~$1 (fractional) | Total US Market |
| VTSAX | Vanguard | Mutual Fund | 0.04% | $3,000 | Total US Market |
| VOO | Vanguard | ETF | 0.03% | ~$1 (fractional) | S&P 500 |
| SWTSX | Schwab | Mutual Fund | 0.03% | $0 | Total US Market |
| SWPPX | Schwab | Mutual Fund | 0.02% | $0 | S&P 500 |
Final Thoughts
The best index funds for beginners are the ones you actually buy and hold. Every fund on this list is excellent. The differences between them are tiny. What matters far more than picking the “perfect” fund is starting today, investing consistently, and letting compound growth do the heavy lifting.
Don’t let analysis paralysis keep you on the sidelines. Pick a fund, set up automatic contributions, and get your money working for you.