Determining a single "best" index fund in the USA is challenging, as the top contenders often offer remarkably similar performance and ultra-low costs. However, several S&P 500 index funds are consistently recognized as leading options due to their broad market exposure, minimal expense ratios, and efficient tracking of the market. These funds provide an excellent way for investors to achieve diversified growth aligned with the performance of America's largest companies.
Top S&P 500 Index Funds to Consider
When evaluating index funds, particularly those tracking the S&P 500, key factors include their expense ratio (the annual fee charged as a percentage of your investment) and how closely they track the underlying index. Lower expense ratios mean more of your money stays invested and grows over time.
Here are some of the highly-regarded S&P 500 index funds available in the USA, known for their low costs and strong performance:
| Fund Name | YTD Return* | Expense Ratio |
|---|---|---|
| Fidelity 500 Index Fund (FXAIX) | 28.05% | 0.015% |
| Schwab S&P 500 Index Fund (SWPPX) | 28.03% | 0.02% |
| iShares Core S&P 500 ETF (IVV) | 28.03% | 0.03% |
| Vanguard S&P 500 ETF (VOO) | 28.04% | 0.03% |
Note: YTD returns are subject to market fluctuations and represent performance up to a specific date.
As you can see, these funds offer highly comparable year-to-date returns, reflecting their shared objective of tracking the S&P 500 index. The primary difference lies in their minuscule expense ratios, with Fidelity's FXAIX currently offering the lowest fee among these top options.
Why These Funds Stand Out
These funds are considered top choices for several reasons:
- Low Expense Ratios: Their expense ratios are among the lowest in the industry, ensuring that a maximum percentage of your investment returns goes directly to you, not to management fees.
- Diversification: By investing in the S&P 500, you gain exposure to 500 of the largest publicly traded companies in the U.S., offering significant diversification across various sectors.
- Market Performance: They aim to mirror the performance of the overall U.S. stock market, providing consistent returns over the long term, historically aligning with economic growth.
- Simplicity: Index funds are passive investments, meaning they require no active management decisions from the investor once purchased, making them ideal for long-term investors.
Key Considerations for Investors
When choosing an index fund, beyond the expense ratio, consider these practical aspects:
- Brokerage Platform: Some funds might be commission-free or have lower fees when bought through specific brokerage platforms (e.g., Fidelity funds often have advantages for Fidelity brokerage clients).
- ETF vs. Mutual Fund: ETFs (Exchange Traded Funds like IVV and VOO) trade like stocks throughout the day, while mutual funds (like FXAIX and SWPPX) are priced once a day after market close. For long-term investors, this distinction is often minor.
- Investment Goals: For most long-term investors aiming for broad market exposure and growth, an S&P 500 index fund is an excellent core holding.
Ultimately, the "best" index fund often comes down to individual investor preference, the brokerage platform they use, and minor differences in fees. The funds listed above are all excellent choices that will serve most investors very well.
