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.

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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

(-0.08%) $-0.02

Current Price

$24.14

Key Data Points

Day's Range

$24.14 - $24.14

52wk Range

$24.14 - $24.14

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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 -0.08%) 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 +0.76%), 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

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NASDAQMUTFUND: SWPPX

Schwab Capital Trust - Schwab S&P 500 Index Fund

Today's Change

(-0.06%) $-0.01

Current Price

$17.40

Key Data Points

Day's Range

$17.40 - $17.40

52wk Range

$17.40 - $17.40

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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 -0.06%) 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

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NYSEMKT: VUG

Vanguard Growth ETF

Today's Change

(-0.84%) $-3.82

Current Price

$451.48

Key Data Points

Day's Range

$449.82 - $459.00

52wk Range

$316.14 - $505.38

Volume

97K

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If you want to assume more investment risk in the pursuit of higher rewards, the Vanguard Growth ETF (VUG -0.90%) 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

(0.52%) $0.77

Current Price

$148.98

Key Data Points

Day's Range

$148.59 - $149.77

52wk Range

$119.83 - $156.39

Volume

171K

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The SPDR S&P Dividend ETF (SDY +0.53%) 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

(0.67%) $0.62

Current Price

$92.63

Key Data Points

Day's Range

$92.25 - $93.31

52wk Range

$76.92 - $96.23

Volume

252K

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If you want to invest across the real estate market, the Vanguard Real Estate ETF (VNQ +0.66%) 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

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NASDAQ: VTWO

Vanguard Russell 2000 ETF

Today's Change

(-0.38%) $-0.38

Current Price

$99.65

Key Data Points

Day's Range

$99.26 - $101.30

52wk Range

$69.38 - $109.76

Volume

274K

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The Vanguard Russell 2000 ETF (VTWO -0.33%), 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

(-1.36%) $-0.96

Current Price

$69.97

Key Data Points

Day's Range

$69.69 - $71.66

52wk Range

$43.17 - $79.73

Volume

151K

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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 -1.36%). 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

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NYSEMKT: SCHE

Schwab Strategic Trust - Schwab Emerging Markets Equity ETF

Today's Change

(-0.21%) $-0.07

Current Price

$33.01

Key Data Points

Day's Range

$32.89 - $33.49

52wk Range

$24.11 - $36.00

Volume

2.7M

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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 -0.21%) 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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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 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%.

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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.

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3 Best S&P 500 Index Funds to Buy in 2026

Are Index Funds a Good Investment? Key Benefits to Know

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Best Small-Cap Index Funds to Buy in 2026

Man standing on one coin, looking out to larger and larger stacks of coins ahead.

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How to choose an index fund

Index funds hold baskets of investments that track a market index, such as the S&P 500 (^GSPC -0.33%). They are passively managed, meaning the fund's holdings are entirely determined by the index the fund tracks.

The goal of an index fund is to match the performance of the underlying index. They're a good choice for long-term investors because you can lock in the returns of the overall stock market or a specific segment of it.

The returns generated by an index fund generally never exceed the performance of the index itself, if only because of index fund expense ratios, which are the annual management fees collected by index fund managers. Since index funds are passively managed, they are actually more likely to outperform funds with active managers over the long term.

An index fund can be either a mutual fund or an exchange-traded fund (ETF), both of which are managed by investment advisers who have to register with the U.S. Securities and Exchange Commission (SEC). Investors buy shares of mutual funds directly from asset management companies, while shares in ETFs are purchased and sold through stock exchanges.

Consider these key factors when picking an index fund to invest in:

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 have minimum investments 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 for as little as $1.

Benchmark tracking performance: The degree to which an index fund tracks its underlying index can vary. The performances of the best index funds are very closely correlated with their benchmark indexes.

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.

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

The bottom line on index funds for long-term investors

Related investing topics

Best Dividend Index Funds to Buy in 2026

9 Best Investments for 2026

Selling Stock: Are There Tax Penalties on Capital Gains?

Should I Buy Stock Now or Wait?

Index fund FAQ

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?

About the Author

Stocks Mentioned

Our Guides

Premium Investing Services

Index fund FAQ

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?

Top index funds to consider

1. Fidelity ZERO Large Cap Index Fund

Best Dividend Index Funds to Buy in 2026

9 Best Investments for 2026

Selling Stock: Are There Tax Penalties on Capital Gains?

Should I Buy Stock Now or Wait?

Key Data Points

2. Schwab S&P 500 Index Fund

3. Vanguard Growth ETF

6. Vanguard Russell 2000 ETF

8. Schwab Emerging Markets Equity ETF

Benefits and risks of investing in index funds

Index fund fees

The bottom line on index funds for long-term investors

Related investing topics

FAQ

Key Data Points

Key Data Points

Key Data Points

Key Data Points

Key Data Points

Key Data Points

Key Data Points

4. SPDR S&P Dividend ETF

5. Vanguard Real Estate ETF

7. ROBO Global Robotics and Automation Index ETF

How to choose an index fund