How much does it cost to invest in an index fund?

Some index funds have minimum investments as high as $3,000, while others, like Fidelity and Schwab, have none. You'll pay management fees through the expense ratio. The fees are deducted from the amount you invest.

How do index funds perform during market downturns?

An index fund will perform very similarly to its benchmark index during a market downturn. If you invested in an S&P 500 index fund and the market dropped by 20%, you'd expect the fund to drop by slightly more than 20% after accounting for fees. However, many index funds track a specific niche of the stock market, and some of these segments perform better during downturns. For example, consumer staples, utilities, and healthcare tend to outperform during downturns. If you invested in an index fund that tracks one of these sectors, you could see gains (or less severe losses) when the overall market is tanking.

Should I diversify across multiple index funds?

Consider diversifying across multiple index funds if the funds track different market segments, but if there's significant overlap between the funds' holdings, owning multiple index funds doesn't provide much additional diversification. If you already own shares of the Schwab S&P 500 Index Fund, you wouldn't achieve additional diversification by investing in the Fidelity ZERO Large Cap Index Fund because the holdings are almost identical. But if you owned shares of one of these funds and you invested in an emerging market index fund, you'd get more diversification from exposure to international stocks.

Can I reinvest dividends from index funds?

Yes, most brokerages give you the option to automatically reinvest index fund dividends.

What is Warren Buffett's favorite index fund?

Warren Buffett has repeatedly endorsed low-cost S&P 500 index funds for most retail investors. The Vanguard S&P 500 ETF (NYSEMKT:VOO), which has an expense ratio of just 0.03%, is a likely contender for Buffett's favorite index fund. The Oracle of Omaha famously bet $1 million that a low-cost S&P 500 index fund would outperform a portfolio of expensive hedge funds over 10 years. Ted Seides of Protégé Partners accepted the bet; Buffett won by a large margin by betting on the VOO.

What is the best-performing index fund?

The best-performing index fund varies significantly by holding period. For example, the VanEck Semiconductor ETF (NASDAQ:SMH) has been a top performer in recent years, with five-year average annualized returns of around 33% as of August 2026. However, broad market funds, such as index funds that track the S&P 500 or total U.S. stock market, have produced steadier returns over time, with average annual returns of about 10%.

8 Best Index Funds to Buy in September 2026

Here are the eight best index funds to add to your portfolio for steady, low-cost growth.

By Robin Hartill, CFP – Updated Sep 17, 2026 at 12:27 PM EST | Fact-checked by Margo Winton Parodi

Key Points

The Fidelity ZERO Large Cap Index Fund has no fees and mimics S&P 500 returns, up 11% so far in 2026.
The SPDR S&P Dividend ETF often outperforms when growth stocks are slumping.
The Vanguard Growth ETF targets large-cap growth stocks and has five-year average annual returns of 15%.

The best index funds diversify your investments and have low fees. Unlike investing in individual stocks or bonds, index funds spread your risk across hundreds of securities, meaning your returns aren't tied to the fate of any single company.

Loading paragraph...

An infographic explaining several factors to consider when choosing an index fund to invest in. — Image source: The Motley Fool.

Loading image...

8 top index funds to consider

Our picks for the best cost-effective index funds can help you accomplish a variety of investment goals. Many of the funds listed below have had solid gains in the first eight months of 2026, despite substantial volatility driven by uncertainties about AI and rising oil prices sparked by the war in Iran.

However, index investing is about building wealth for the long haul, not short-term gains or losses.

1. Fidelity ZERO Large Cap Index Fund

Loading paragraph...

NASDAQMUTFUND: FNILX

Fidelity Concord Street Trust - Fidelity Zero Large Cap Index Fund

Today's Change

(-0.44%) $-0.12

Current Price

$27.20

Key Data Points

Day's Range

$27.20 - $27.20

52wk Range

$27.20 - $27.20

Loading company_card...

Investing in S&P 500 index funds is one of the closest things to a nearly guaranteed way to build wealth over time. The Fidelity ZERO Large Cap Index Fund (FNIL.X -0.44%) tracks an index of more than 500 U.S. large-cap stocks and performs very similarly to an S&P 500 index fund.

However, because this fund is not an official S&P 500 index fund, it avoids paying expensive licensing fees to S&P Global (SPGI -0.65%), the index's parent company. The fund tracks the Fidelity U.S. Large Cap Index as its benchmark.

The "ZERO" in the fund's name denotes that its expense ratio is 0%. There's also no minimum investment, making the fund a good choice for beginning investors.

During the first eight months of 2026, the fund had risen over 11%, similar to the S&P 500's gain during the same period.

2. Schwab S&P 500 Index Fund

Loading paragraph...

NASDAQMUTFUND: SWPPX

Schwab Capital Trust - Schwab S&P 500 Index Fund

Today's Change

(-0.46%) $-0.09

Current Price

$19.59

Key Data Points

Day's Range

$19.59 - $19.59

52wk Range

$19.59 - $19.59

Loading company_card...

If you want to invest in an official S&P 500 index fund, the Schwab S&P 500 Index Fund (SWPP.X -0.46%) is about the cheapest you'll find. Its expense ratio is 0.02%, meaning you'll pay just $0.20 per $1,000 invested annually.

Because the investment fee is so low, your returns are virtually identical to the S&P 500's performance. There's no minimum investment amount, so you can start investing with as little as $1.

The fund had year-to-date gains of about 11% through August 2026, almost identical to those of the S&P 500.

3. Vanguard Growth ETF

Loading paragraph...

NYSEMKT: VUG

Vanguard Morningstar Growth ETF

Today's Change

(1.57%) $1.37

Current Price

$88.43

Key Data Points

AUM

$385B

Dividend Yield

1.78%

Expense Ratio

0.03%

Top Holdings

NVDA

13.63%

AAPL

12.49%

MSFT

10.13%

Loading company_card...

If you want to assume more investment risk in the pursuit of higher rewards, the Vanguard Growth ETF (VUG +1.57%) is a solid choice. The fund tracks the CRSP U.S. Large Cap Growth Index, which performs similarly to the S&P 500 Growth Index. The ETF invests in about 150 U.S. large-cap growth stocks and has a minuscule 0.03% expense ratio. The fund is most heavily concentrated in tech stocks, which make up about two-thirds of its holdings.

Through the end of 2025, the fund's average annual return over five years (before taxes) was almost 15%, similar to the S&P 500's return during the same period. The VUG's year-to-date gains have slightly lagged the S&P 500's in 2026, reflecting marketwide AI jitters.

4. SPDR S&P Dividend ETF

Loading paragraph...

NYSEMKT: SDY

SPDR Series Trust - State Street SPDR S&P Dividend ETF

Today's Change

(0.20%) $0.30

Current Price

$152.17

Key Data Points

AUM

$21B

Dividend Yield

2.45%

Expense Ratio

0.35%

Top Holdings

3.33%

ACN

3.15%

CVX

2.09%

Loading company_card...

The SPDR S&P Dividend ETF (SDY +0.20%) is a top-performing index fund for income-oriented investors. The dividend-weighted fund's benchmark is the S&P High Yield Dividend Aristocrats® Index, which tracks about 150 stocks with the highest dividend yields in the S&P Composite 1500 Index. (Dividend Aristocrats® is a registered trademark of Standard & Poor's Financial Services LLC.) All the companies owned by the ETF have increased their dividend payments annually for at least 25 consecutive years.

Dividend-paying stocks tend to be less volatile compared to the overall stock market. Uncertainty often prompts a resurgence in safer, dividend-paying stocks. For example, the SDY ETF has often outperformed the S&P 500 at times when investors are anxious about the AI stock boom. As of August 2026, its year-to-date gains were roughly even with the S&P 500's, though.

The fund's 30-day SEC yield in September 2026 was 2.46% -- significantly higher than the S&P 500's 0.98%. The expense ratio is also somewhat higher at 0.35%.

Several real estate investment trusts (REITs) are represented in this fund. REITs typically pay high dividends because they're required to disburse at least 90% of their taxable income. The ETF is underweight for tech stocks, which generally don't pay generous dividends.

Loading paragraph...

Dividend Yield

A financial metric indicating annual dividend income relative to stock price, expressed as a percentage.

Loading definition...

5. Vanguard Real Estate ETF

Loading paragraph...

NYSEMKT: VNQ

Vanguard Real Estate ETF

Today's Change

(0.35%) $0.33

Current Price

$93.81

Key Data Points

AUM

$71B

Dividend Yield

3.70%

Expense Ratio

0.13%

Top Holdings

WELL

10.23%

PLD

8.08%

EQIX

6.39%

Loading company_card...

If you want to invest across the real estate market, the Vanguard Real Estate ETF (VNQ +0.35%) is a solid, low-cost option. With an expense ratio of 0.13%, it's also the largest real estate index fund by far, with total net assets of $70.8 billion in September 2026.

Although its benchmark index includes a few real estate management and development companies, it is mostly composed of equity REITs that own and operate income-producing real estate.

Because it invests primarily in REITs, the ETF is also attractive to dividend investors. The fund's adjusted effective yield through August 2026 was about 2.7%. The Vanguard ETF may also appeal to investors concerned about inflation since real estate is traditionally seen as a hedge against rising prices elsewhere.

Loading paragraph...

6. Vanguard Russell 2000 ETF

Loading paragraph...

NASDAQ: VTWO

Vanguard Russell 2000 ETF

Today's Change

(0.50%) $0.58

Current Price

$115.65

Key Data Points

AUM

$18B

Dividend Yield

1.13%

Expense Ratio

0.06%

Top Holdings

FROG

0.34%

MOG-A

0.33%

UMBF

0.33%

Loading company_card...

The Vanguard Russell 2000 ETF (VTWO +0.50%), which tracks the Russell 2000, is a good place to start for investors looking to capitalize on the upside potential of small-cap investing. The fund invests in about 2,000 small- and mid-cap companies and has about $18 billion in assets under management.

At 0.06%, its expense ratio is relatively low, especially for a fund offering exposure to the companies with the most growth potential.

Through August 2026, the fund outperformed the S&P 500 index, with a year-to-date return of about 20%, reflecting the recent outperformance of small-cap stocks.

7. ROBO Global Robotics and Automation Index ETF

Loading paragraph...

NYSEMKT: ROBO

Exchange Traded Concepts Trust - Robo Global Robotics And Automation Index ETF

Today's Change

(1.38%) $1.07

Current Price

$78.63

Key Data Points

AUM

$2.0B

Dividend Yield

0.37%

Expense Ratio

0.95%

Top Holdings

ILMN

2.14%

2395.TW

1.88%

AUTO.OL

1.88%

Loading company_card...

Thematic investors wanting to capitalize on a long-term secular trend should check out the ROBO Global Robotics and Automation Index ETF (ROBO +1.38%). The index fund's benchmark is the Robo Global Robotics and Automation Index, which tracks 79 companies in robotics, automation, and artificial intelligence (AI). It has almost $2 billion in total net assets and a 0.95% expense ratio, higher than any fund on this list.

Loading paragraph...

Artificial Intelligence

Artificial intelligence is the use of machines to mimic human intelligence.

Loading definition...

The ETF offers investors a way to capture the growth of several booming trends. Robotics offers significant cost savings for companies; the industry is forecast to have a compound annual growth rate of almost 20% through 2031. Interest in artificial intelligence (AI) stocks has surged since late 2022, when ChatGPT launched.

However, the ETF has still underperformed the stock market since then, posting a three-year average annualized return of less than 11% through August 2026, compared to about 21% for the S&P 500 over the same period. The fund was up over 16% in the first eight months of 2026, though, reflecting investors' overall bullishness on automation and AI despite some pullback in June and July.

8. Schwab Emerging Markets Equity ETF

Loading paragraph...

NYSEMKT: SCHE

Schwab Strategic Trust - Schwab Emerging Markets Equity ETF

Today's Change

(1.27%) $0.46

Current Price

$36.73

Key Data Points

AUM

$13B

Dividend Yield

2.59%

Expense Ratio

0.06%

Top Holdings

2330.TW

16.96%

0700.HK

3.23%

9988.HK

2.40%

Loading company_card...

If you want to diversify your portfolio through exposure to high-growth emerging markets but don't want your risk concentrated in a single economy or region, the Schwab Emerging Markets Equity ETF (SCHE +1.27%) may be a good fit. It tracks the FTSE Emerging Index, a collection of large- and mid-cap stocks in more than 20 developing countries.

The fund has more than 2,200 holdings, with the largest concentrations in China, India, Taiwan, Brazil, and South Africa. Its expense ratio is only 0.06%.

The stocks of companies in emerging markets have historically underperformed compared to U.S. stocks. In the past five years, as of September 2026, the Schwab emerging market fund had annualized returns of about 6%. Meanwhile, the S&P 500 racked up annualized returns of about 13% during the same five-year period.

Still, given that about 85% of the world's population lives in developing countries, investors with a long-term focus who are comfortable with volatility may want to consider this fund.

Loading paragraph...

How index funds work

An index fund tracks the performance of a market index, such as the S&P 500 or the Russell 2000, rather than having investment teams select investments. Unlike actively managed funds, index funds are passively managed. And rather than trying to outperform the market, they aim to replicate the benchmark index's performance.

If you invest in an index fund with a low tracking error (meaning the fund doesn't deviate much from its benchmark), your returns will be very similar to the performance of the underlying index, minus fees. For example, say you invested in an S&P 500 index fund in a year when the S&P 500 returned 10%, and the fund has a 0.1% expense ratio. You'd expect a return of approximately 9.9% for the year.

Loading paragraph...

How to choose an index fund

Consider the market segment you're targeting, any fees, and your investment goals (such as growth or reliable dividend income) when choosing an index fund.

Target market segment: Some index funds confer portfolio exposure to the entire U.S. stock market by tracking indexes such as the S&P 500. Others track narrower indexes focused on specific stock market sectors, industries, countries, or company sizes.
Your investment goals: Some stock market indexes and, by extension, some index funds track companies with specific characteristics, such as high growth potential, a history of reliable dividend payments, or adherence to environmental, social, and governance (ESG) standards.
Expense ratio: An index fund's expense ratio -- the percentage of your investment paid annually as a management fee to the fund's manager -- can vary significantly. A good expense ratio for a total stock market index fund is about 0.1% or less; a small number of index funds have 0% expense ratios. More specialized index funds tend to have higher expense ratios.
Minimum required investment: Some mutual funds require an initial investment of $1,000 or more. ETF index funds are accessible for the cost of a single share. Many brokers also offer ETFs as fractional shares, allowing you to invest as little as $1.
Benchmark tracking performance: The degree to which an index fund tracks its underlying index can vary. The performance of the best index funds is closely correlated with their benchmark indexes.

Loading paragraph...

Benefits and risks of investing in index funds

The benefits of investing in index fees include the low costs and automatic diversification, but one downside is that you can't beat the market.

Benefits of investing in index funds:

Low fees: Perhaps the biggest benefit of investing in a passively managed index fund is the low cost because you're not paying fund managers to handpick investments.
Diversification: Because an index fund invests in many different companies, you get far more diversification than you can typically get by building a portfolio on your own, particularly if the fund tracks a major index like the S&P 500.
Good tool for long-term investing: Shares of individual companies can shift dramatically based on rumors, speculation, or a single earnings call. Though the overall stock market isn't immune to investor sentiment, its highs and lows are less pronounced than those of individual stocks.

Risks of investing in index funds:

You can't beat the market: Some investors hesitate to invest in index funds because they don't beat the market -- index funds aim to replicate an index's performance, so at best, your results will be on par with the underlying index's results, minus fees.
Not all indexes are the same: Funds that track the entire stock market or a large segment of it, like the S&P 500, have been solid winners over time, but some indexes are incredibly niche and far more vulnerable to market hype.

Loading paragraph...

Index fund fees

Index fund fees are expressed as the expense ratio. If you invest $10,000 in an index fund with a 0.1% expense ratio, $10 of your investment goes toward fees, and the remaining $9,990 is invested. Expense ratio fees cover costs of management, administration, and marketing.

Because they're passively managed and have low overhead, most index funds have extremely low fees. The average index fund expense ratio is 0.06%, according to Morningstar research. By comparison, the average actively managed fund fee is 10 times higher at 0.6%.

The bottom line on index funds for long-term investors

There are two ways to make money from index funds: Sell the investment for a gain or earn dividends. A growth-focused index fund, such as the Vanguard Growth ETF, has the potential for significant gains.

However, higher rewards come with greater risk, and dividend payments will likely be minimal. If you want investment income, a dividend fund like the SPDR S&P Dividend ETF is a good choice. There's less potential for big gains, but you can earn reliable dividend income.

Although there's no single best index fund to invest in, a couple of good options are an S&P 500 index fund, which tracks about 80% of the U.S. stock market, or a total stock market fund, which tracks the entire U.S. stock market. These tend to be good choices because they're well diversified and allow you to lock in the historical growth of the domestic stock market.

All investments carry some risk, but S&P 500 index funds have historically been safe long-term investments, as the S&P 500 has delivered positive returns over long periods. The S&P 500's average annual returns are about 10%.

Loading paragraph...

8 Best Index Funds to Buy in September 2026

Here are the eight best index funds to add to your portfolio for steady, low-cost growth.

Key Points

8 top index funds to consider

1. Fidelity ZERO Large Cap Index Fund

Key Data Points

2. Schwab S&P 500 Index Fund

Key Data Points

3. Vanguard Growth ETF

Key Data Points

4. SPDR S&P Dividend ETF

Key Data Points

5. Vanguard Real Estate ETF

Key Data Points

6. Vanguard Russell 2000 ETF

Key Data Points

7. ROBO Global Robotics and Automation Index ETF

Key Data Points

8. Schwab Emerging Markets Equity ETF

Key Data Points

How index funds work

How to choose an index fund

Benefits and risks of investing in index funds

Index fund fees

The bottom line on index funds for long-term investors

Related investing topics

6 Best Dividend Index Funds to Buy in 2026

What to Invest In Right Now, September 2026

Selling Stock: Are There Tax Penalties on Capital Gains?

Should I Buy Stock Now or Wait?

How much does it cost to invest in an index fund?

How much does it cost to invest in an index fund?

How do index funds perform during market downturns?

How do index funds perform during market downturns?

Should I diversify across multiple index funds?

Should I diversify across multiple index funds?

Can I reinvest dividends from index funds?

Can I reinvest dividends from index funds?

What is Warren Buffett's favorite index fund?

What is Warren Buffett's favorite index fund?

What is the best-performing index fund?

What is the best-performing index fund?

About the Author

Read Next

Stocks Mentioned

Motley Fool Stock Advisor’s Latest Pick

Premium Investing Services

How much does it cost to invest in an index fund?

How much does it cost to invest in an index fund?

How do index funds perform during market downturns?

How do index funds perform during market downturns?

Should I diversify across multiple index funds?

Should I diversify across multiple index funds?

Can I reinvest dividends from index funds?

Can I reinvest dividends from index funds?

What is Warren Buffett's favorite index fund?

What is Warren Buffett's favorite index fund?

What is the best-performing index fund?

What is the best-performing index fund?

8 top index funds to consider

1. Fidelity ZERO Large Cap Index Fund

5. Vanguard Real Estate ETF

6. Vanguard Russell 2000 ETF

8. Schwab Emerging Markets Equity ETF

How index funds work

How to choose an index fund

Benefits and risks of investing in index funds

Index fund fees

The bottom line on index funds for long-term investors

Related investing topics

6 Best Dividend Index Funds to Buy in 2026

What to Invest In Right Now, September 2026

Selling Stock: Are There Tax Penalties on Capital Gains?

Should I Buy Stock Now or Wait?

2. Schwab S&P 500 Index Fund

Key Data Points

3. Vanguard Growth ETF

4. SPDR S&P Dividend ETF

7. ROBO Global Robotics and Automation Index ETF

Key Data Points