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The index mutual fund industry has only grown in size and popularity since it began with Vanguard's 500 Index Fund in 1976. Index funds track the components of a market index, such as the Standard & Poor's 500 Index, and mutual funds are investment vehicles comprising a pool of funds collected from many investors. Often, investors are increasingly attracted to index mutual funds for their low operating expenses, low portfolio turnover, and broad and diversified market exposure, as well as the opportunity to invest passively.
Here, we take a look at just four top U.S. equity index mutual funds: the Vanguard 500 Index Fund (VFINX), the Vanguard Total Stock Market Index Fund (VTSMX), the Fidelity 500 Index Fund (FXAIX) and the Schwab Total Stock Market Index Fund (SWTSX). All information presented here was accurate as of March 2020.
KEY TAKEAWAYS
Index funds have become increasingly popular among investors over the past decade.
These low-cost mutual funds are passive investments that seek to replicate a major stock market index rather than try to beat it.
Here, we look at four excellent index mutual funds that you may want to consider.
Vanguard and Fidelity may dominate the index fund industry in terms of size, but Schwab has come on strong with its own menu of low-cost funds, led by the $10.5 billion Schwab Total Stock Market Index Fund. This fund tracks the Dow Jones U.S. Total Stock Market Index, which consists of the entire U.S. stock market. The fund is allowed to invest in short-term derivatives and futures contracts to close the performance gap that typically exists between the fund and the index. It may also choose to focus investments in a particular sector or group of sectors based on their relative weighting in the index. Since inception, Schwab Total Stock Market Index Fund returned an annual average of 6.7% and has a very low expense ratio of 0.03%.
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