Decisions can be difficult when you’re faced with too many choices. Take, for instance, index funds. Investors looking for a good, passively managed U.S. stock fund have morethan 600 distinct mutual funds and exchange-traded funds from which to choose. More than 85 are tied to Standard & Poor’s 500-stock index in some fashion or another.
Luckily, you don’t have to comb through the lists to find the best funds. We’ve done the work for you.
Here are our favorite index funds in eight key categories, including companies of all sizes in U.S. and international stock markets. We also include total-market choices here and abroad for investors who want to keep things simple with a one-stop fund. Why no bond funds? Research shows that fixed income is one area where it pays to go active.
To find our favorite stock index funds, we stuck to some basic indexing tenets: Invest in broad indexes that track wide swaths of the market and that are weighted by market value—meaning the bigger the company, the bigger its position in the index. Then we focused on funds that charge among the lowest fees and that have performed closely in line with their indexes over time. Where possible, we make recommendations for a mutual fund and an ETF in each category—the one exception is in foreign, large-company stock funds.