Are dividends from low-cost index funds taxable?

Dividends from low-cost index funds are considered taxable income if held in a standard brokerage account. Dividends paid by index funds held in retirement accounts are not taxable, but any eventual withdrawals from the account can be taxable income.

Can low-cost index funds provide long-term growth?

Yes, they can! For example, S&P 500 index funds have historically produced total returns of 9% to 10% per year over long periods, which can help create significant wealth.

What is the minimum investment required for low-cost index funds?

Index funds in ETF form don't have minimum investment requirements. If your broker allows fractional share investing, you can buy ETFs with as little as $1. If not, the effective minimum investment is the cost of buying a single share of the index fund. Mutual funds that track indexes generally have minimum investment requirements of $500 or more.

What is a low-cost index fund?

A low-cost index fund is an ETF or mutual fund that tracks a benchmark index, such as the S&P 500. Because these simply track an index, they don't require professional investment managers, so they have much lower costs than most actively managed mutual funds.

Is it good to invest in a low-cost index fund?

A low-cost index fund can help you invest your money in the stock market and pay minimal fees while doing so. Like any investment strategy, low-cost index funds aren't ideal for everyone, but they can be a great way to gain exposure to the stock market without the risks and research required to pick individual stocks.

Is the S&P 500 a low-cost index fund?

The S&P 500 is a benchmark index, not an investment you can buy directly. However, several low-cost index funds aim to replicate the index's performance by directly owning the stocks of the 500 companies that comprise it.

How safe are low-cost index funds?

There are low-cost index funds that track various stock market indexes, as well as indexes for commodities, bonds, foreign currencies, and more. Different index funds have different levels of volatility and safety, and should be considered individually.

10 Best Low-Cost Index Funds to Buy in 2026

Check out the top low-cost index funds to see whether any are a fit for your portfolio.

By Matthew Frankel, CFP – Updated Apr 17, 2026 at 3:01 PM EST | Fact-checked by Frank Bass

Key Points

Low-cost index funds track benchmark indexes and often charge lower fees than actively managed funds.
Expense ratios are key; even small differences can significantly impact long-term gains.
Index funds in ETF form are preferred for their ease of trade and typically lower investment minimums.

Low-cost index funds are ETFs or mutual funds that pool investors' money to track a benchmark index. There's no specific fee level that defines an index fund as "low-cost," but an expense ratio that is significantly below the industry average is a characteristic.

Investors who focus on minimizing their investing costs can generate vastly superior returns over time.

Loading paragraph...

Many investors prefer index funds in ETF (exchange-traded fund) form over mutual funds. They're easier to trade, require a lower initial investment, and often have lower expense ratios.

In this article, we'll discuss how to choose low-cost index funds that are right for you. We'll also share 10 of our favorite low-cost index funds to get your search started.

Choosing a low-cost index fund

Low-cost index funds can be divided into several categories. Understanding these different types can help you choose the best low-cost index fund for you:

Total U.S. stock market funds: Total U.S. stock market funds, which track indexes that include all publicly traded U.S. companies, can be a smart way to get broad-based exposure to the U.S. stock market.
Benchmark index funds: Funds that track the S&P 500 (^GSPC -1.17%) or the Nasdaq-100, just to name a couple of examples, allow you to match the performance of a specific benchmark over time.
Index funds by market segment: Investing in ETFs by market segment is another way to structure your low-cost index fund portfolio. Index funds focused on large-cap, mid-cap, or small-cap companies are just a few examples.
Other index funds: There are many other index funds beyond the three categories already discussed. Some allow you to invest in a particular stock market sector, such as technology. Others let you invest in specific types of stocks, such as value, growth, or dividend stocks.

There are several factors to consider, in addition to the investment focus of the index fund, including:

Expense ratio: An index fund's expense ratio tells you how much your investment fees will be, as a percentage of assets. With low-cost index funds, it can be smart to compare the expense ratios of several funds that track the same index. Even a seemingly small difference can have a big impact on your long-term performance.
Total assets: How much investor money is in the fund? Some of the largest low-cost index funds have assets of well over $1 trillion.

Top low-cost index funds to consider

Now, let's get to some examples.

These index funds have some of the lowest expense ratios and could be worth a closer look:

Loading paragraph...

Data sources: Fund providers and ETFdb.com. Numbers are rounded to the nearest billion, where applicable. *Includes both ETF and mutual fund classes. Data current as of Aug. 10, 2025..
Index Fund	Expense Ratio	Assets Under Management
Vanguard S&P 500 ETF (NYSEMKT:VOO)	0.03%	$1.42 trillion*
Vanguard Large-Cap ETF (NYSEMKT:VV)	0.03%	$64 billion
Schwab U.S. Large-Cap ETF (NYSEMKT:SCHX)	0.03%	$67 billion
Vanguard Mid-Cap ETF (NYSEMKT:VO)	0.04%	$64 billion
Schwab U.S. Mid-Cap ETF (NYSEMKT:SCHM)	0.04%	$14 billion
Vanguard Small-Cap ETF (NYSEMKT:VB)	0.04%	$71 billion
iShares Core S&P Small-Cap ETF (NYSEMKT:IJR)	0.06%	$99 billion
Schwab U.S. Broad Market (NYSEMKT:SCHB)	0.03%	$40 billion
iShares Core S&P Total US Stock Market (NYSEMKT:ITOT)	0.03%	$87 billion
Vanguard Total Stock Market ETF (NYSEMKT:VTI)	0.03%	$2.0 trillion*

Loading table...

Let's take a deeper dive into these low-cost index funds:

1. Vanguard Total Stock Market Index Fund ETF

NYSEMKT: VTI

Vanguard Total Stock Market ETF

Today's Change

(-1.24%) $-4.55

Current Price

$362.85

Key Data Points

Day's Range

$362.31 - $364.86

52wk Range

$283.00 - $368.25

Volume

97K

Loading company_card...

If you want to hold a single index fund ETF that invests in the total U.S. stock market and in the right proportions, the Vanguard Total Stock Market Index Fund ETF might be your best option.

Holding shares in this fund means you'll hold large-, mid-, and small-cap companies proportional to the broader market -- and at a bargain-basement 0.03% expense ratio.

For the set-it-and-forget-it investor, this investment strategy is very difficult to match from a time- and cost-efficiency perspective. Many fund management companies offer total market funds at similarly low costs.

Loading paragraph...

2. Vanguard S&P 500 ETF

NYSEMKT: VOO

Vanguard S&P 500 ETF

Today's Change

(-1.13%) $-7.79

Current Price

$679.94

Key Data Points

Day's Range

$678.50 - $683.50

52wk Range

$529.11 - $689.10

Volume

249K

Loading company_card...

The Vanguard S&P 500 ETF tracks the S&P 500. The benchmark index is weighted by market capitalization and includes 500 of the largest U.S. companies. The fund's broad diversification is appealing to many investors.

The S&P 500 is "self-cleansing," meaning that when a company no longer meets the index's criteria for inclusion, it is replaced by a growing company that meets those criteria. The formulaic nature of the inclusion process ensures that only high-quality companies are listed by S&P and are invested in by S&P 500 index funds, such as the Vanguard S&P 500 ETF.

Loading paragraph...

3. Vanguard Mid-Cap ETF

NYSEMKT: VO

Vanguard Mid-Cap ETF

Today's Change

(-1.23%) $-0.95

Current Price

$76.57

Key Data Points

Day's Range

$76.52 - $76.93

52wk Range

$66.07 - $78.39

Volume

32K

Loading company_card...

The Vanguard Mid-Cap ETF invests in companies with mid-range market capitalizations, with a median market capitalization of approximately $39 billion.

The mid-cap market segment includes companies with established businesses and reliable revenue streams, many of which have yet to grow to their full potential.

The ETF tracks the CRSP U.S. Mid-Cap index by aiming to hold the same stocks in the same proportion as the index. The fund's small expense ratio of 0.03% is extremely competitive among mid-cap ETFs.

Loading paragraph...

Revenue

Revenue is a business’s gross income or the amount of money it brings in from regular operations before costs are considered.

Loading definition...

4. Vanguard Small-Cap ETF

NYSEMKT: VB

Vanguard Index Funds - Vanguard Small-Cap ETF

Today's Change

(-1.75%) $-5.03

Current Price

$281.98

Key Data Points

Day's Range

$281.67 - $284.25

52wk Range

$221.85 - $291.99

Volume

9.1K

Loading company_card...

The Vanguard Small-Cap ETF is an attractive option for those seeking to invest in companies with the most growth potential. The fund tracks the CRSP U.S. Small-Cap Index, focusing on U.S. companies in the bottom 2% to 15% of the market capitalization range. The median market cap of the roughly 1,340 stocks in the ETF is $8.5 billion.

Investing in a low-cost, small-cap index fund ETF, such as the Vanguard Small-Cap ETF, can help boost your overall returns. However, due to its small-cap focus, the ETF's performance can be more volatile than that of other investments.

Loading paragraph...

5. Vanguard Large-Cap ETF

NYSEMKT: VV

Vanguard Index Funds - Vanguard Large-Cap ETF

Today's Change

(-0.94%) $-3.24

Current Price

$340.69

Key Data Points

Day's Range

$339.41 - $341.94

52wk Range

$265.35 - $344.61

Volume

255K

Loading company_card...

As the name suggests, the Vanguard Large-Cap ETF tracks the CRSP U.S. Large Cap Index of large-cap stocks. This index comprises 444 stocks, and, as you might expect, it is very close to the S&P 500. In fact, the fund's top holdings are the same as those of the Vanguard S&P 500 ETF, and in nearly identical weightings.

6. Schwab U.S. Large-Cap ETF

Loading paragraph...

NYSEMKT: SCHX

Schwab Strategic Trust - Schwab U.s. Large-Cap ETF

Today's Change

(-1.05%) $-0.31

Current Price

$29.10

Key Data Points

Day's Range

$29.00 - $29.21

52wk Range

$21.81 - $29.46

Volume

12M

Loading company_card...

Unlike the Vanguard Large-Cap ETF, the Schwab U.S. Large-Cap ETF is slightly broader than the S&P 500, covering the 750 largest U.S. companies by market cap. In short, it has the same top holdings as the other large-cap ETFs on this list, but because the fund has 250 additional stocks, the weights are slightly lower because capital is spread out across more stocks.

7. Schwab U.S. Mid-Cap ETF

Loading paragraph...

NYSEMKT: SCHM

Schwab Strategic Trust - Schwab U.s. Mid-Cap ETF

Today's Change

(-1.55%) $-0.54

Current Price

$34.02

Key Data Points

Day's Range

$33.91 - $34.19

52wk Range

$26.45 - $35.03

Volume

996K

Loading company_card...

The Schwab U.S. Mid-Cap ETF is an index fund that tracks the Dow Jones U.S. Mid-Cap Total Stock Market Index. It owns a total of 497 stocks, and all but five of its holdings make up less than 1% of the fund. Top positions include Robinhood (HOOD -4.25%), United Airlines (NYSE:UAL), and Interactive Brokers (IBKR -1.42%), just to give you an idea about the size of the companies that are included in the index.

8. iShares Core S&P Small-Cap ETF

Loading paragraph...

NYSEMKT: IJR

iShares Core S&P Small-Cap ETF

Today's Change

(-1.39%) $-1.89

Current Price

$134.25

Key Data Points

Day's Range

$133.84 - $135.09

52wk Range

$102.57 - $139.49

Volume

Loading company_card...

The iShares Core S&P Small-Cap ETF tracks an index of small-cap stocks, with about 650 different holdings and a low 0.06% expense ratio. It's a narrower index than the commonly used Russell 2000 Small-Cap index, but even so, no stock makes up more than 0.61% of the fund's total weighting. To name a couple, top holdings include SanDisk (SNDK +1.36%) and BorgWarner (BWA -6.27%).

Loading paragraph...

9. Schwab U.S. Broad Market ETF

NYSEMKT: SCHB

Schwab Strategic Trust - Schwab U.s. Broad Market ETF

Today's Change

(-1.11%) $-0.32

Current Price

$28.47

Key Data Points

Day's Range

$28.38 - $28.58

52wk Range

$22.16 - $28.85

Volume

7.5M

Loading company_card...

The Schwab U.S. Broad Market ETF is somewhat between an S&P 500 index fund and a total market index fund. It tracks an index that includes the 2,500 largest publicly traded U.S. companies. However, it is a weighted fund, so it has the same top holdings as the S&P 500, just with slightly lower weights.

10. iShares Core S&P Total U.S. Stock Market

Loading paragraph...

NYSEMKT: ITOT

iShares Trust - iShares Core S&P Total U.s. Stock Market ETF

Today's Change

(-1.03%) $-1.68

Current Price

$161.52

Key Data Points

Day's Range

$160.92 - $162.06

52wk Range

$125.59 - $163.57

Volume

1.3M

Loading company_card...

The iShares Core S&P Total U.S. Stock Market ETF is very similar to the Schwab Broad Market fund discussed earlier. It tracks the S&P Total Market Index, which contains about 2,500 companies ranging from mega-caps to small-caps. As you might expect, top holdings include Nvidia (NVDA -4.35%), Microsoft (MSFT +2.80%), and Apple (AAPL +0.56%). Because there are more stocks, the weights of each are slightly lower than those of an S&P 500 index fund.

Loading paragraph...

Set it and forget it

The beauty of an index-based investing style is that you only need to buy and hold -- and be unwaveringly patient. Paying very little for such a strategy is not only possible but also the best way to ensure that you keep the majority of your investment returns over the long haul.

Is a low-cost index fund right for you?

With so many low-cost index funds available, there's little reason to pay more than the minimum. But like any investment, there are pros and cons to consider:

Pros:

Low fees - Keep more of your returns.
Wealth creation - Index funds are virtually guaranteed to match the performance (net of fees) of the underlying index. This can be a great way to build wealth.
Low maintenance - With a low-cost index fund, you can simply buy shares and let the fund do the hard work for you.
Many choices - There are hundreds of excellent low-cost index funds to choose from.

Cons:

You won't beat the market - By definition, an index fund won't deliver superior performance over time.
Volatility - Just because index funds spread your money out doesn't mean they can't experience large price swings in short time periods.

Loading paragraph...

Building a portfolio with low-cost index funds

There's no perfect rule for asset allocation when it comes to low-cost index funds. However, a smart strategy is to invest in a diversified portfolio that fits your investment goals.

As an example, the index funds in my portfolio fall into five different categories:

Large-cap stocks (or total market index funds).
Small-cap stocks.
International stocks.
Fixed-income (bond) index funds.
Real estate index funds.

Of my index fund holdings, I have roughly 50% in the first category, with the rest split fairly evenly among the other four. But that might not be ideal for you.

The best course of action if you're unsure of how to construct a portfolio of index funds is to seek the advice of a Certified Financial Planner® or other investment professional who can evaluate your personal investment goals and risk tolerance.

Loading paragraph...

FAQ

Low-cost index funds FAQ

Loading faq...

About the Author

Matt Frankel, CFP, is a contributing Motley Fool stock market analyst specializing in the real estate and financial sectors. Prior to The Motley Fool, Matt taught high school and college mathematics. He holds a bachelor’s degree in physics from the University of South Carolina, a master’s degree in mathematics from Nova Southeastern University, and a graduate certificate in financial planning from Florida State University. He won a SABEW award for coverage of the 2017 Tax Cuts and Jobs Act. He is also regularly interviewed by Cheddar, Globe St, The National Desk, and other TV networks and publications for his real estate, financial, stock market, and investing expertise.

TMFMattFrankel

@MattFrankelCFP

Matt Frankel, CFP has positions in Vanguard Index Funds - Vanguard Small-Cap ETF and Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Apple, Interactive Brokers Group, Microsoft, Nvidia, Vanguard Index Funds - Vanguard Small-Cap ETF, Vanguard Mid-Cap ETF, Vanguard S&P 500 ETF, Vanguard Total Stock Market ETF, and iShares Core S&P Small-Cap ETF. The Motley Fool recommends BorgWarner and recommends the following options: long January 2027 $43.75 calls on Interactive Brokers Group and short January 2027 $46.25 calls on Interactive Brokers Group. The Motley Fool has a disclosure policy.

10 Best Low-Cost Index Funds to Buy in 2026

Check out the top low-cost index funds to see whether any are a fit for your portfolio.

Key Points

Choosing a low-cost index fund

Top low-cost index funds to consider

1. Vanguard Total Stock Market Index Fund ETF

Key Data Points

2. Vanguard S&P 500 ETF

Key Data Points

3. Vanguard Mid-Cap ETF

Key Data Points

4. Vanguard Small-Cap ETF

Key Data Points

5. Vanguard Large-Cap ETF

Key Data Points

6. Schwab U.S. Large-Cap ETF

Key Data Points

7. Schwab U.S. Mid-Cap ETF

Key Data Points

8. iShares Core S&P Small-Cap ETF

Key Data Points

9. Schwab U.S. Broad Market ETF

Key Data Points

10. iShares Core S&P Total U.S. Stock Market

Key Data Points

Set it and forget it

Is a low-cost index fund right for you?

Building a portfolio with low-cost index funds

Related investing topics

How to Invest Money: A Step-by-Step Guide to Getting Good Returns

How to Invest in Index Funds: A Beginner's Guide

8 Best Index Funds to Buy in May 2026

Best Dividend Index Funds to Buy in 2026

FAQ

Low-cost index funds FAQ

Are dividends from low-cost index funds taxable?

Are dividends from low-cost index funds taxable?

Can low-cost index funds provide long-term growth?

Can low-cost index funds provide long-term growth?

What is the minimum investment required for low-cost index funds?

What is the minimum investment required for low-cost index funds?

What is a low-cost index fund?

What is a low-cost index fund?

Is it good to invest in a low-cost index fund?

Is it good to invest in a low-cost index fund?

Is the S&P 500 a low-cost index fund?

Is the S&P 500 a low-cost index fund?

How safe are low-cost index funds?

How safe are low-cost index funds?

About the Author

Read Next

Stocks Mentioned

Premium Investing Services

Choosing a low-cost index fund

Top low-cost index funds to consider

Key Data Points

Key Data Points

Key Data Points

Key Data Points

Key Data Points

6. Schwab U.S. Large-Cap ETF

7. Schwab U.S. Mid-Cap ETF

Key Data Points

Key Data Points

Key Data Points

10. iShares Core S&P Total U.S. Stock Market

Is a low-cost index fund right for you?

Building a portfolio with low-cost index funds

How to Invest Money: A Step-by-Step Guide to Getting Good Returns

How to Invest in Index Funds: A Beginner's Guide

8 Best Index Funds to Buy in May 2026

Best Dividend Index Funds to Buy in 2026

Low-cost index funds FAQ

Are dividends from low-cost index funds taxable?

Are dividends from low-cost index funds taxable?

Can low-cost index funds provide long-term growth?

Can low-cost index funds provide long-term growth?

What is the minimum investment required for low-cost index funds?

What is the minimum investment required for low-cost index funds?

What is a low-cost index fund?