What Is an Index Fund?
Index funds are an option for investment or a way of investing that comes with a low fee and no fuss. According to reviews from investors, index funds serve as the smartest and easiest way to invest. The market investment is greatly talking about index mutual funds and for a good reason, index fund are very simple, hands-off, and cost less when investing into the stock market.
If you’re wondering what Index funds is all about. However, index funds are a form or type of investment that comprises stocks that reflex the companies and its performance in a market index, this includes S&P 500. It is very easy to manage an index fund and it comes with lower fees, better than actively managed funds. The benefit of index funds is that it generates very high investment returns. Also, it is a well-diversified investment. Plus, you can easily purchase index fund, and here is how to go about it.
How to Invest in Index Funds
Step 1: Pick which index
According to reports, index mutual funds are meant to track a wide range of indexes. Using the S&P 500 (Standard & Poor’s 500) index is among the list of best-known indexes in the world. Due to the fact that the 500 companies that S&P tracks include larger and popular United Stated businesses that represent various industries. You need to understand that S&P 500 is not the only index in the world, we have indexes and corresponding index fund. However, when picking which index, you must watch out for company size and capitalization, geography, business sector or industry, asset type, and market opportunities.
Step 2: Select which index fund
After you have decided which index is most suitable. Then it time for you to choose or select which index fund to go for, you can decide to go for or which or select a corresponding index fund to purchase. Most often it usually depends on the cost.
According to reports, the one with a low cost serves as the right one to go for because it serves as a big selling point of index funds. It very simple and cheap to run. Some of the cost you need to consider includes investment minimum, account minimum, expense ratio, and tax-cost ratio.
Step 3: Decide where to buy
There are different ways where you can purchase an index fund which includes directly from a mutual fund company or via a brokerage. This also applies to exchange-traded funds (ETFs), this is mini mutual funds that serve as trade stocks. First of all, before you decide where you buy an index fund, you need to watch out for the following Fund selection, Convenience, Trading costs, Impact investing, and Commission-free option.
Best Index Funds
With denying the fact, S&P 500 is one the most popular index fund, but aside from S&P 500, there are other suitable or best index funds to try out which includes the following:
| Index Fund | Minimum Investment | Expense Ratio |
| Vanguard 500 Index Fund – Admiral Shares (VFIAX) | $3,000 | 0.04% |
| Schwab S&P 500 Index Fund (SWPPX) | No minimum | 0.02% |
| Fidelity 500 Index Fund (FXAIX) | No minimum | 0.015% |
| Fidelity Zero Large Cap Index (FNILX) | No minimum | 0.0% |
| T. Rowe Price Equity Index 500 Fund (PREIX) | $2,500 | 0.2% |
In addition, index funds is one of the most popular options of investment in the United States because of its simple to use and have instant diversity.