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

Some index funds have a minimum investment that's as high as $3,000, while others, like Fidelity and Schwab, have no minimum investment. You'll pay management fees in the form of 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?

Before buying multiple index funds for diversification, look at the underlying holdings of each fund. 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 nearly 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.

8 Best Index Funds to Buy in March 2026

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

By Robin Hartill, CFP – Updated Mar 4, 2026 at 5:22 PM EST | Fact-checked by Frank Bass

Key Points

Index funds are less risky as they diversify investments across many companies.
Choosing funds with low expense ratios ensures minimal fees, like those under 0.1%.
Index funds are suited for long-term investment, aligning closely with market returns.

The best index funds can help you build wealth by diversifying your portfolio while keeping fees low. 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.

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

Top index funds to consider

Our picks for the eight best index funds for this year can help you accomplish a variety of investment goals. Plus, they have low expense ratios and low minimum investments.

Many of the funds listed below soared in 2025 in spite of substantial volatility earlier in the year. The rocky performance earlier in the year was largely due to fears of a trade war due to President Trump's tariffs. But remember: Index investing is about building wealth for the long haul, so try not to focus on short-term ups and downs.

1. Fidelity ZERO Large Cap Index Fund

NASDAQMUTFUND: FNILX

Fidelity Concord Street Trust - Fidelity Zero Large Cap Index Fund

Today's Change

(-1.27%) $-0.31

Current Price

$24.02

Key Data Points

Day's Range

$24.02 - $24.02

52wk Range

$24.02 - $24.02

Investing in S&P 500 index funds is, perhaps, the closest thing to a guaranteed way to build wealth over time. The Fidelity ZERO Large Cap Index Fund (FNIL.X -1.27%) 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 -1.49%), 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.

The fund's performance closely mirrors that of the S&P 500. The fund rose about 17% in 2025, slightly lagging the S&P 500 index's results for the year.

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2. Schwab S&P 500 Index Fund

NASDAQMUTFUND: SWPPX

Schwab Capital Trust - Schwab S&P 500 Index Fund

Today's Change

(-1.31%) $-0.23

Current Price

$17.30

Key Data Points

Day's Range

$17.30 - $17.30

52wk Range

$17.30 - $17.30

If you want to invest in an official S&P 500 index fund, the Schwab S&P 500 Index Fund (SWPP.X -1.31%) is about the cheapest you'll find. Its expense ratio is 0.02%, meaning you'll pay just $0.20 annually for every $1,000 you invest.

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

Like its benchmark index, the fund had gains of about 17.9% in 2025, almost identical to that of the S&P 500.

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3. Vanguard Growth ETF

NYSEMKT: VUG

Vanguard Growth ETF

Today's Change

(1.31%) $6.02

Current Price

$464.10

Key Data Points

Day's Range

$452.05 - $465.23

52wk Range

$316.14 - $505.38

Volume

If you want to assume more investment risk in the pursuit of higher rewards, the Vanguard Growth ETF (VUG +1.31%) is a solid choice. The fund tracks the CRSP US Large Cap Growth Index, which performs similarly to the S&P 500 Growth Index. The ETF invests in 150 U.S. large-cap growth stocks. The fund is most heavily concentrated in the following sectors:

Consumer staples and utility stocks each make up less than 1% of the fund's value. The ETF has a minuscule 0.04% expense ratio.

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 returns for the same period.

4. SPDR S&P Dividend ETF

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NYSEMKT: SDY

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

Today's Change

(-0.14%) $-0.21

Current Price

$151.24

Key Data Points

Day's Range

$148.82 - $151.56

52wk Range

$119.83 - $156.39

Volume

254K

The SPDR S&P Dividend ETF (SDY -0.14%) 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.)

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Dividend Yield

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

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NYSEMKT: VNQ

Vanguard Real Estate ETF

Today's Change

(0.22%) $0.21

Current Price

$93.76

Key Data Points

Day's Range

$91.55 - $94.08

52wk Range

$76.92 - $96.23

Volume

If you want to invest across the real estate market, the Vanguard Real Estate ETF (VNQ +0.22%) 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 more than $65 billion.

Its benchmark index is the MSCI US Investable Market Real Estate 25/50 Index, which broadly tracks equity REITs in the U.S. Although the index includes a few real estate management and development companies, it consists mostly of equity REITs, which own and operate income-producing real estate.

Because it invests primarily in REITs, the ETF is also attractive to dividend investors. The fund's 12-month dividend yield in December 2025 was 3.92%. The Vanguard ETF may also appeal to investors concerned about inflation since real estate is traditionally seen as a hedge against rising prices elsewhere.

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6. Vanguard Russell 2000 ETF

NASDAQ: VTWO

Vanguard Russell 2000 ETF

Today's Change

(1.21%) $1.23

Current Price

$102.63

Key Data Points

Day's Range

$98.82 - $102.92

52wk Range

$69.38 - $109.76

Volume

286K

The Vanguard Russell 2000 ETF (VTWO +1.21%), which tracks the Russell 2000, is a good place to start for investors who want to take advantage of the potential upside of investing in small-cap companies. The fund invests in about 2,000 small- and mid-cap companies with a median market capitalization of $3.5 billion.

As of January 2026, the index fund's largest concentrations were inhealthcare (19%), industrials (18%), and financials (17%). At 0.1%, its expense ratio is relatively low, especially for a fund offering exposure to the companies with the most growth potential. Like its benchmark index, the Vanguard Russell 2000 ETF had total returns of about 13% in 2025.

7. ROBO Global Robotics and Automation Index ETF

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NYSEMKT: ROBO

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

Today's Change

(0.68%) $0.49

Current Price

$72.47

Key Data Points

Day's Range

$69.22 - $72.63

52wk Range

$43.17 - $79.73

Volume

383K

Thematic investors wanting to capitalize on a long-term secular trend should check out the ROBO Global Robotics and Automation Index ETF (ROBO +0.68%). The index fund's benchmark is the Robo Global Robotics and Automation Index, which tracks 77 robotics, automation, and artificial intelligence (AI) companies. It has roughly $1.5 billion in total net assets and a 0.95% expense ratio, higher than any fund on this list.

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Artificial Intelligence

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

The ETF offers investors a way to capture the growth of several booming trends. Robotics offers huge cost savings to companies; the industry is forecast to have a compound annual growth rate of 14% through 2030. 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 three-year average annualized returns of less than 15% through the end of 2025, compared to about 21% for the S&P 500 over the same period.

8. Schwab Emerging Markets Equity ETF

NYSEMKT: SCHE

Schwab Strategic Trust - Schwab Emerging Markets Equity ETF

Today's Change

(1.54%) $0.51

Current Price

$33.66

Key Data Points

Day's Range

$32.70 - $33.76

52wk Range

$24.11 - $36.00

Volume

4.5M

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 +1.54%) 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 2,100 holdings, with the largest concentrations in China, India, Taiwan, Brazil, and South Africa. Its expense ratio is only 0.11%.

The stocks of companies in emerging markets have historically underperformed compared to U.S. stocks. In the past five years as of December 2025, the Schwab emerging market fund had annualized returns of about 4.5%. Meanwhile, the S&P 500 racked up annualized returns of about 15% during the same five-year period.

The Schwab emerging market fund rose over 26% in 2025, as international stocks outperformed U.S. stocks for the year.

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

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Benefits and risks of investing in index funds

Index funds are often the backbone of a retirement portfolio for good reason: They're an effortless, beginner-friendly way to invest. However, there are a few pros and cons to be aware of first.

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. Many funds have expense ratios of 0.1% or less.
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 rise and fall dramatically based on rumors, speculation, or a single earnings call. Though the overall stock market isn't immune to investor sentiment, the highs and lows are less pronounced compared to 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.

An assortment of stock index quotes on a digital monitor. — Image source: Getty Images.

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, like the Vanguard Growth ETF, has the potential for big 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 been historically safe investments for the long term since the S&P 500 has always delivered positive returns over long periods. The S&P 500's average annual returns are about 10%.

FAQ

Index fund FAQ

About the Author

Robin Hartill, CFP, is a contributing writer at The Motley Fool. Robin’s work has also been published by Yahoo Finance, USA Today, and Penny Hoarder. She is a graduate of the University of Florida.

TMFRobinHartill

Robin Hartill, CFP has positions in Vanguard Real Estate ETF. The Motley Fool has positions in and recommends Chevron, Realty Income, S&P Global, Target, Vanguard Growth ETF, and Vanguard Real Estate ETF. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.