What Are the Best Index Funds for Beginners?
Short answer: VTSAX (Vanguard Total Stock Market), FZROX (Fidelity ZERO Total Market), and VOO (Vanguard S&P 500 ETF) are the three strongest starting points for new investors in 2026.
Index funds are the single most recommended investment vehicle for beginners, and for good reason. They offer instant diversification across hundreds or thousands of stocks, charge minimal fees, and have consistently outperformed the majority of actively managed funds over long time horizons.
As of 2026, the S&P 500 has delivered an average annual return of approximately 10.2% over the past 30 years before inflation. That means every $1,000 invested would have grown to roughly $2,700 over a decade at the historical average, not accounting for taxes or inflation.
The funds below represent the lowest-cost, most accessible options available to everyday investors. If you are just getting started with $500 or less, several of these funds have no minimum investment requirement at all.
Key Statistics: Index Fund Investing in 2026
- Over a 20-year period, 92% of large-cap fund managers failed to beat the S&P 500 (S&P Dow Jones Indices, SPIVA 2025 Scorecard)
- The average actively managed mutual fund charges 0.66% in fees vs. 0.03-0.05% for major index funds (Morningstar, 2025)
- A 0.50% difference in expense ratio on a $100,000 portfolio costs roughly $12,000 over 20 years in lost growth
- Total US stock market index funds hold 3,600+ stocks, providing broader diversification than S&P 500 funds (500 stocks)
- Index fund assets under management in the US surpassed $12.5 trillion in 2025 (Investment Company Institute)
Best Index Funds Comparison Table
Short answer: All five funds charge between 0% and 0.04% in annual fees, but they differ in structure, minimums, and the specific index they track.
| Fund | Type | Expense Ratio | Minimum | Index Tracked | Holdings |
|---|---|---|---|---|---|
| VTSAX | Mutual Fund | 0.04% | $3,000 | CRSP US Total Market | 3,600+ |
| VTI | ETF | 0.03% | $0 (1 share) | CRSP US Total Market | 3,600+ |
| FZROX | Mutual Fund | 0.00% | $0 | Fidelity US Total Investable Market | 2,600+ |
| SWPPX | Mutual Fund | 0.02% | $0 | S&P 500 | 500+ |
| VOO | ETF | 0.03% | $0 (1 share) | S&P 500 | 500+ |
| BND | ETF | 0.03% | $0 (1 share) | Bloomberg US Aggregate Bond | 10,000+ |
VTSAX and VTI: Best Total Stock Market Exposure
Short answer: VTSAX (mutual fund) and VTI (ETF) track the same index and give you exposure to the entire US stock market for just 0.03-0.04% per year.
Vanguard’s Total Stock Market funds are the most popular index funds in the world for a reason. They hold over 3,600 stocks spanning large-cap, mid-cap, and small-cap companies, giving you a stake in virtually every publicly traded US company.
The key difference between VTSAX and VTI is structure. VTSAX is a mutual fund with a $3,000 minimum initial investment and trades once per day at market close. VTI is an ETF with no minimum (you buy individual shares, currently around $280-300 as of early 2026) and trades throughout the day like a stock. Most brokerages now support fractional ETF shares, so you can invest any dollar amount in VTI.
For beginners, VTI is often the easier entry point because there is no $3,000 minimum. If you already have a Vanguard account with enough to meet the minimum, VTSAX offers the convenience of automatic investments at specific dollar amounts.
Over the past 10 years through 2025, the total US stock market has returned approximately 12.4% annually, outperforming the long-term average due to strong technology sector performance. Past results do not guarantee future returns, but the broad diversification of these funds provides exposure to whatever sectors lead the market next.
FZROX: Best Zero-Fee Option
Short answer: Fidelity’s FZROX charges a true 0.00% expense ratio, making it the lowest-cost index fund in existence and an outstanding choice for cost-conscious investors.
Fidelity launched its ZERO fund lineup in 2018, and FZROX remains the only total market index fund with literally no annual fee. There is no minimum investment, and it is available exclusively through Fidelity brokerage accounts.
The trade-off is subtle but worth understanding. FZROX tracks Fidelity’s proprietary US Total Investable Market Index rather than the widely used CRSP index that VTSAX and VTI follow. In practice, the performance difference is negligible, typically less than 0.01% per year. However, FZROX holds roughly 2,600 stocks compared to VTSAX’s 3,600+, meaning it excludes some of the smallest micro-cap companies.
Another consideration is portability. Because FZROX is a Fidelity-proprietary fund, you cannot transfer it to another brokerage. If you ever leave Fidelity, you would need to sell your FZROX shares and buy a comparable fund at the new broker, which could trigger a taxable event in a non-retirement account.
For practical purposes, FZROX is an excellent choice for anyone investing through Fidelity. The 0.00% expense ratio saves you real money over decades. On a $100,000 portfolio, the difference between 0.00% and 0.03% fees is about $900 over 30 years, not life-changing but not nothing either.
SWPPX: Best S&P 500 Mutual Fund
Short answer: Schwab’s S&P 500 Index Fund charges just 0.02% with no investment minimum, making it the best S&P 500 mutual fund for beginners who use Charles Schwab.
SWPPX tracks the S&P 500, which represents approximately 80% of the total US stock market by capitalization. It has no minimum investment, charges a razor-thin 0.02% expense ratio, and is available through Charles Schwab brokerage accounts.
An S&P 500 fund like SWPPX differs from a total market fund like VTSAX in one key way: it excludes mid-cap and small-cap stocks. Over long periods, total market funds have historically returned slightly more than S&P 500 funds due to the small-cap premium, but the difference is small, typically 0.1-0.3% annually.
SWPPX is a strong option for Schwab account holders who want simplicity. The S&P 500 is the most widely followed stock market index in the world, making it easy to benchmark your performance and understand what you own.
VOO: Best S&P 500 ETF
Short answer: Vanguard’s VOO is the most popular S&P 500 ETF with $450+ billion in assets and a 0.03% expense ratio, available at any brokerage.
VOO is the ETF version of Vanguard’s S&P 500 fund and competes directly with SPY and IVV. With over $450 billion in assets under management as of 2026, VOO offers rock-bottom fees and exceptional liquidity. You can buy VOO at virtually any brokerage, unlike FZROX which is Fidelity-only.
VOO is a strong choice for beginners who want simplicity and portability. The S&P 500 is easy to understand, widely reported in news, and has a long track record. If you want a single fund that captures the bulk of US stock market returns, VOO does the job at minimal cost.
BND: Best Bond Index Fund for Balance
Short answer: BND provides exposure to the entire US investment-grade bond market for 0.03%, and it is the standard recommendation for the bond allocation in a diversified portfolio.
While stock index funds should make up the majority of a younger investor’s portfolio, adding a bond allocation reduces volatility during downturns. BND holds over 10,000 US investment-grade bonds, including Treasury bonds, corporate bonds, and mortgage-backed securities.
As of 2026, BND yields approximately 4.3% in annual income, which is notably higher than the sub-2% yields that prevailed from 2015-2021. A common starting allocation for beginners in their 20s and 30s is 90% stocks and 10% bonds, shifting more toward bonds as you approach retirement age.
BND is not designed for growth. It is designed to provide stability and income. During the 2022 stock market decline, a portfolio with 20% bonds lost less than a 100% stock portfolio, illustrating the cushioning effect bonds provide during turbulent markets.
Total Stock Market vs. S&P 500: Which Should You Pick?
Short answer: Total stock market funds provide broader diversification, but the performance difference versus S&P 500 funds is small enough that either choice works well for beginners.
This is one of the most common questions new investors ask, and the honest answer is that it does not matter as much as you think. The S&P 500 makes up roughly 80% of a total market fund by weight, so their returns are highly correlated. Over the past 20 years, the total US stock market and the S&P 500 have returned within 0.2% of each other annually.
Choose a total market fund (VTSAX, VTI, FZROX) if you want exposure to small-cap and mid-cap stocks and prefer the broadest possible diversification. Choose an S&P 500 fund (VOO, SWPPX) if you want simplicity and are comfortable focusing on the 500 largest US companies. Either way, you are making a sound long-term investment.
Frequently Asked Questions
How much money do I need to start investing in index funds?
As little as $1. FZROX has no minimum investment, and most brokerages now offer fractional shares of ETFs like VTI and VOO. Schwab, Fidelity, and Robinhood all allow fractional ETF purchases. VTSAX is the exception with its $3,000 minimum, but you can buy VTI (the ETF equivalent) with no minimum instead.
Are index funds safe?
Index funds carry market risk, meaning they will lose value during downturns. The S&P 500 dropped 34% in March 2020 and fell roughly 25% in 2022. However, it has recovered from every historical decline and delivered positive returns over every 20-year rolling period in its history. Index funds are considered lower risk than individual stocks because of diversification, but they are not risk-free.
What is an expense ratio and why does it matter?
An expense ratio is the annual fee a fund charges as a percentage of your investment. A 0.03% expense ratio means you pay $3 per year for every $10,000 invested. This may sound trivial, but over 30 years, high fees compound dramatically. A 1% expense ratio on a $10,000 investment growing at 10% annually costs you roughly $30,000 in lost growth over 30 years compared to a 0.03% fund.
Should I invest in a mutual fund or an ETF?
For most beginners, it does not matter. ETFs trade like stocks throughout the day and generally have slightly lower expense ratios. Mutual funds allow you to invest exact dollar amounts and set up automatic contributions more easily. If you want to invest $200 on the 1st of every month automatically, a mutual fund is more convenient. If you want maximum flexibility and slightly lower costs, ETFs have a slight edge.
Do I need a financial advisor to invest in index funds?
No. You can open a brokerage account at Vanguard, Fidelity, or Schwab in under 15 minutes and buy index funds directly. A financial advisor can be valuable for complex situations like tax planning, estate planning, or managing a large inheritance, but buying and holding index funds is straightforward enough to handle on your own.
How are index fund returns taxed?
In a taxable brokerage account, you pay capital gains tax when you sell shares at a profit and income tax on dividends received. In a tax-advantaged account like a 401(k) or Roth IRA, gains grow tax-deferred or tax-free respectively. For this reason, most beginners should prioritize investing in index funds through retirement accounts before opening a taxable brokerage account.
The Bottom Line
Index funds are the most reliable wealth-building tool available to everyday investors. As of 2026, you can invest in the entire US stock market for as little as 0.00% in annual fees through FZROX, or for 0.03% through industry staples like VTI and VOO. The most important decision is not which specific fund you pick but that you start investing consistently. A $500 monthly investment in a total stock market index fund, earning the historical average of 10% annually, would grow to roughly $380,000 in 20 years. Start with any fund on this list, contribute regularly, and let compounding do the heavy lifting.