Index mutual funds provide one of the most effective ways to invest to meet your long term investing goals. When comparing index mutual funds, you do not need to worry about how the fund is managed, as an index fund will simply own all the stocks that fall in the index it is tracking.
How then do you determine the best index mutual funds? You look at the funds’ expenses and the level of service the company provides. Below is a list of the best index mutual funds based on cost and service.
Vanguard came out with the very first index mutual fund in 1976, the Vanguard 500 Index Fund, and has continued to be a leader in the index fund industry ever since, which is why they are at the top of the best index fund list. As a firm, Vanguard is committed to providing low cost investment options. As they say on their website,
“You can't control market performance, but you can control how much you pay for your investments.”
With over 100 mutual funds to choose from, including some great all-in-one funds and retirement income funds (which both allow you to invest in a diversified portfolio with a single investment) you are bound to find investments that meet your goals.
iShares offers a variation of a mutual fund called an exchange traded fund. Exchange traded funds trade like a stock, with a current share price that changes throughout the day. The iShares website provides some great educational tools including a comparison of exchange traded funds verses open end index funds verses actively managed funds. You can learn more by reading:
iShares offers a large selection of funds. You can use their index funds to invest in a single country’s market, like China or India, or buy the emerging markets sector as a whole. They have index funds that cover almost any asset class you could desire, including real estate and commodities.
“Schwab’s Equity Index Funds are among the lowest-cost index funds around. Fund operating expenses are well below the industry average, and there are no loads or transaction fees.”
DFA funds do not actually track an index, as they have their own way of defining certain sectors of the market. The funds are not actively managed, focus on low costs, and like an index fund they don’t believe you can “beat” the market.
Dimensional Funds are designed around years of academic research. They say on their website
“There is a model of investing based not on speculation but on the science of capital markets. Decades of research guide the way.”
DFA funds are only available inside pension plans or through fee-only advisors. You can search on their website for an advisor who subscribes to their academic research and follows their philosophy.