Best Index Funds for Long-Term Wealth Building

Why Index Funds Beat Almost Everything

Over any 15-year period, roughly 90% of actively managed funds underperform their benchmark index. Professional stock pickers, with all their research and resources, consistently fail to beat the market after fees. This is not controversial — it is settled finance.

Index funds win because they:

• Charge almost nothing (0.00–0.10% vs. 0.50–1.50% for active funds)
• Own hundreds or thousands of stocks, providing instant diversification
• Trade less frequently, generating fewer taxable events
• Remove the temptation to chase trends or time the market

Warren Buffett has recommended index funds for non-professional investors for over two decades. When he wagered $1 million that an S&P 500 index fund would beat a collection of hedge funds over 10 years, he won convincingly.

Best U.S. Total Stock Market Index Funds

These funds own every publicly traded company in the United States — approximately 4,000 stocks — in a single fund.

Fidelity ZERO Total Market Index (FZROX)

Expense ratio: 0.00% — literally free Minimum investment: $0 What it tracks: Fidelity U.S. Total Investable Market Index

FZROX is the only major index fund with a true zero expense ratio. You pay nothing in fees, ever. The fund tracks Fidelity's proprietary index rather than a well-known benchmark, but the performance difference is negligible.

Read our full FZROX review →

Vanguard Total Stock Market ETF (VTI)

Expense ratio: 0.03% Minimum investment: ~$260 (1 share, or $1 with fractional) What it tracks: CRSP US Total Market Index

VTI is the most popular index fund in the world for good reason. At 0.03%, a $100,000 portfolio costs $30/year in fees. The fund has been running since 2001 and tracks the broadest U.S. stock index available.

Read our full VTI review →

Schwab S&P 500 Index Fund (SWPPX)

Expense ratio: 0.02% Minimum investment: $0 What it tracks: S&P 500

SWPPX tracks the 500 largest U.S. companies rather than the total market. In practice, the S&P 500 and total market move almost identically because large-cap stocks dominate both. At 0.02%, this is one of the cheapest S&P 500 funds available.

Read our full SWPPX review →

How to Build a Complete Portfolio

A single U.S. total market fund is a solid foundation, but adding international and bond exposure creates a more resilient portfolio:

Aggressive Portfolio (20s–30s)

Moderate Portfolio (40s–50s)

Conservative Portfolio (near retirement)

The total annual fee for any of these portfolios is under $50 per $100,000 invested. A traditional financial advisor charging 1% would cost $1,000 for the same amount.

Index Fund vs. ETF: What Is the Difference?

Both are index-tracking funds, but the wrapper differs:

• Mutual fund index funds (FZROX, SWPPX) trade once per day at market close. You can set automatic investments for exact dollar amounts. Best for hands-off, automatic investing.
• ETFs (VTI, VOO) trade throughout the day like stocks. You can set limit orders and trade in real-time. Best for taxable accounts (slightly more tax-efficient) and people who want intraday flexibility.

For most long-term investors, the difference is irrelevant. Pick whichever your brokerage makes easiest.

FAQs

Are index funds safe? Index funds carry market risk — they go down when the market goes down. However, they are among the safest equity investments because they are diversified across hundreds or thousands of companies. Over any 20-year period in history, U.S. stock index funds have always produced positive returns.

How much should I invest in index funds? As much as you can afford after covering essentials and an emergency fund. Even $50/month makes a meaningful difference over decades. The key is consistency and time.

Should I invest in S&P 500 or total market? Either is fine. The S&P 500 captures 80% of U.S. market value, so the two track very closely. Total market includes small and mid-cap stocks for slightly more diversification. Over long periods, their returns are nearly identical.

When should I rebalance my index fund portfolio? Once or twice per year, or when an allocation drifts more than 5% from your target. Many brokerages let you set automatic rebalancing. Rebalancing forces you to buy low and sell high — the opposite of what our instincts tell us to do.

Compare all index funds & ETFs →