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Back to Mutual Fund Guides
IndexBeginner

Index Funds 101 — The Simplest Way to Invest

Overview

Index funds passively track a market benchmark, offering broad diversification, ultra-low fees, and historically superior performance versus most active managers. Pair them with a dollar-cost averaging strategy to smooth out volatility over time. Whether you're building a retirement portfolio or just getting started, index funds belong at the core — explore how they stack up in our ETFs vs index funds comparison. Visit the mutual funds hub to browse every fund category we cover.

Key Takeaways

  • Index funds replicate a benchmark (S&P 500, Total Market, etc.) at minimal cost.
  • Over any 15-year window, roughly 90% of active managers underperform their benchmark index.
  • Expense ratios as low as 0.015% (Fidelity ZERO) mean more of your returns stay in your pocket.
  • Dollar-cost averaging into a total market index fund is statistically one of the best strategies for most investors.

Practical Tips

  • VTSAX / VTI (Vanguard), FSKAX / FZROX (Fidelity), SWTSX (Schwab) are all excellent total US market options.
  • Choose mutual fund shares for auto-investing; choose ETF shares if you want intraday trading.
  • Don't over-diversify: you don't need 10 index funds — a US total market + international + bonds covers everything.

More Index Guides

S&P 500 Index Funds — Pros, Cons & Best Options

The S&P 500 index tracks 500 of the largest US public companies. It's the benchmark for American equity performance and the foundation of many portfolios. Use our <a href="/tools/screener" class="text-primary hover:underline">stock screener</a> to examine individual holdings within the index and identify sector weightings. For long-term wealth building, combine an S&P 500 fund with a <a href="/tools/calculators/compound-calculator" class="text-primary hover:underline">compound interest calculator</a> to project growth, and explore broader <a href="/market/stocks" class="text-primary hover:underline">stock market</a> coverage for additional context.

International Index Funds — Global Diversification

International index funds provide exposure to developed and emerging markets outside the US. Global diversification reduces single-country risk and captures growth worldwide. Pair international holdings with domestic equity to build a balanced allocation — our <a href="/tools/portfolio-trackers" class="text-primary hover:underline">portfolio trackers</a> make monitoring easy. Learn how global diversification fits into broader <a href="/strategies" class="text-primary hover:underline">investment strategies</a> and review key terms in the <a href="/glossary" class="text-primary hover:underline">glossary</a>.

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