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?

Before buying multiple index funds for diversification, review each fund's underlying holdings. 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 nearly 34% as of April 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 May 2026

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

By Robin Hartill, CFP – Updated May 17, 2026 at 4:24 PM EST | Fact-checked by Frank Bass

Key Points

Top index funds in 2025 had robust performance despite earlier volatility, offering low-cost investment options.
Fidelity ZERO Large Cap Index Fund tracks U.S. large-cap stocks with a 0% expense ratio and no minimum investment.
Schwab S&P 500 Index Fund offers the lowest fees for tracking the S&P 500, with no minimum investment needed.

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.

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

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NASDAQMUTFUND: FNILX

Fidelity Concord Street Trust - Fidelity Zero Large Cap Index Fund

Today's Change

(-1.27%) $-0.34

Current Price

$26.41

Key Data Points

Day's Range

$26.41 - $26.41

52wk Range

$26.41 - $26.41

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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 -0.19%), 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's return for the year. In the first four months of 2026, the fund rose about 5%, similar to the S&P 500's gain during the same period.

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2. Schwab S&P 500 Index Fund

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NASDAQMUTFUND: SWPPX

Schwab Capital Trust - Schwab S&P 500 Index Fund

Today's Change

(-1.19%) $-0.23

Current Price

$19.06

Key Data Points

Day's Range

$19.06 - $19.06

52wk Range

$19.06 - $19.06

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If you want to invest in an official S&P 500 index fund, the Schwab S&P 500 Index Fund (SWPP.X -1.19%) 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 performance of the S&P 500. There's no minimum investment amount, so you can start investing with as little as $1.

The fund had gains of about 17.9% in 2025 and 5.6% through April 2026, almost identical to that of the S&P 500.

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3. Vanguard Growth ETF

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NYSEMKT: VUG

Vanguard Growth ETF

Today's Change

(-1.20%) $-1.06

Current Price

$87.43

Key Data Points

Day's Range

$86.92 - $88.25

52wk Range

$66.98 - $88.63

Volume

7.2M

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If you want to assume more investment risk in the pursuit of higher rewards, the Vanguard Growth ETF (VUG -1.20%) 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 about 150 U.S. large-cap growth stocks. The fund is most heavily concentrated in tech stocks, which make up about two-thirds of its holdings.

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. The VUG's year-to-date gains were relatively flat through the end of April 2026, reflecting the underperformance of tech stocks driven in part by AI worries.

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

(-0.88%) $-1.29

Current Price

$146.11

Key Data Points

Day's Range

$146.11 - $147.42

52wk Range

$131.96 - $156.39

Volume

174K

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The SPDR S&P Dividend ETF (SDY -0.88%) 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

(-1.48%) $-1.41

Current Price

$93.91

Key Data Points

Day's Range

$93.78 - $95.12

52wk Range

$86.36 - $97.37

Volume

4.5M

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If you want to invest across the real estate market, the Vanguard Real Estate ETF (VNQ -1.48%) 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 almost $70 billion.

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 12-month dividend yield in May 2026 was about 3.4%. 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

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NASDAQ: VTWO

Vanguard Russell 2000 ETF

Today's Change

(-2.39%) $-2.75

Current Price

$112.17

Key Data Points

Day's Range

$112.09 - $113.27

52wk Range

$80.71 - $116.20

Volume

113K

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The Vanguard Russell 2000 ETF (VTWO -2.39%), which tracks the Russell 2000, is a good place to start for investors looking to capitalize on 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 $3.6 billion.

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. Through April 2026, the fund had year-to-date returns of around 13%, reflecting the outperformance of small-cap stocks in the first few months of the year.

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

(-2.24%) $-1.95

Current Price

$84.99

Key Data Points

Day's Range

$84.59 - $85.55

52wk Range

$54.78 - $87.50

Volume

109K

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Thematic investors wanting to capitalize on a long-term secular trend should check out the ROBO Global Robotics and Automation Index ETF (ROBO -2.24%). 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 $1.7 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.

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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 a three-year average annualized return of less than 15% through the end of 2025, compared to about 21% for the S&P 500 over the same period. The fund was up more than 18% in the first four months of 2026, reflecting investors' bullishness on automation and AI.

8. Schwab Emerging Markets Equity ETF

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NYSEMKT: SCHE

Schwab Strategic Trust - Schwab Emerging Markets Equity ETF

Today's Change

(-2.64%) $-0.96

Current Price

$35.44

Key Data Points

Day's Range

$35.34 - $35.65

52wk Range

$28.48 - $37.06

Volume

1.9M

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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 -2.64%) 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 0.11%.

The stocks of companies in emerging markets have historically underperformed compared to U.S. stocks. In the past five years as of April 2026, the Schwab emerging market fund had annualized returns of about 5%. Meanwhile, the S&P 500 racked up annualized returns of about 12% 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 and who are comfortable with volatility may want to consider this fund.

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How index funds work

An index fund is a mutual fund or exchange-traded fund (ETF) that tracks the performance of a market index, such as the S&P 500 or the Russell 2000. Unlike actively managed funds, which have management teams that select investments and aim to beat the market, index funds are passively managed; rather than trying to outperform the market, the goal is 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.

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

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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 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%.

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Index fund FAQ

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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.

8 Best Index Funds to Buy in May 2026

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

Key Points

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

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

The bottom line on index funds for long-term investors

Related investing topics

Best Dividend Index Funds to Buy in 2026

What to Invest In Right Now, May 2026

Selling Stock: Are There Tax Penalties on Capital Gains?

Should I Buy Stock Now or Wait?

Index fund FAQ

About the Author

Read Next

Stocks Mentioned

Premium Investing Services

Key Data Points

Top index funds to consider

1. Fidelity ZERO Large Cap Index Fund

2. Schwab S&P 500 Index Fund

3. Vanguard Growth 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

Best Dividend Index Funds to Buy in 2026

What to Invest In Right Now, May 2026

Selling Stock: Are There Tax Penalties on Capital Gains?

Should I Buy Stock Now or Wait?

Key Data Points

Key Data Points

Key Data Points

Key Data Points

Key Data Points

Key Data Points

Key Data Points

Index fund FAQ

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

How do index funds perform during market downturns?

Should I diversify across multiple index funds?

Can I reinvest dividends from index funds?

What is Warren Buffett's favorite index fund?

What is the best-performing index fund?

Index fund fees

The bottom line on index funds for long-term investors

Related investing topics

FAQ

4. SPDR S&P Dividend ETF

5. Vanguard Real Estate ETF

7. ROBO Global Robotics and Automation Index ETF