12 Great Index Funds to Buy and Hold Forever

Index funds do what their name says: They track a market of stocks or bonds with the idea of replicating that market's performance as closely as possible.

They're ideal for people who want to keep money in the market long term but don't want to choose stocks themselves. That's why employer plans tend to focus on them. Plus, not many stock pickers, professional or otherwise, have long-term records that outpace the biggest index funds.

Index funds can be purchased as exchange-traded funds (ETFs) or mutual funds, and they come in a dizzying array of flavors that cover everything from the S&P 500 to the fossil fuels and clean energy sectors to international markets of all sizes and geographies.

Here are 12 to consider.

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Let's start with the largest index fund of all. The Vanguard Total Stock Market Index Fund Admiral Shares (NASDAQMUTFUND: VTSAX) follows the CRSP US Total Market Index and at this writing holds 4,056 stocks. This massive mutual fund also has total assets of a whopping $1.2 trillion. It's also provided a total return of about 200% in the past 10 years, basically tripling your money if you put it in then and still have it there now.

ALSO READ: How to Invest in Index Funds

The iShares Core S&P 500 ETF (NYSEMKT: IVV) tracks the S&P 500 index, which itself tracks the performance of 500 large companies listed on American exchanges. BlackRock (NYSE: BLK), the world's largest asset manager, runs this $280 billion fund, which currently is yielding about 1.5% while selling for about $377 a share.

The Dow Jones Industrial Average is a price-weighted index of 30 of America's bluest blue chip stocks. Like the S&P 500, it's also one of the most followed stock market indexes in the world. The SPDR Dow Jones Industrial Average ETF (NYSEMKT: DIA) is from State Street (NYSE: STT) and has provided a total return of about 180% over the past 10 years.

ALSO READ: What Is the Dow Jones Industrial Average Stock Index?

The Fidelity Nasdaq Composite Index Fund (NASDAQMUTFUND: FNCMX) tracks another of the most widely benchmarked stock indexes. The Nasdaq is tech heavy, and while this Fidelity fund holds nearly 3,500 stocks, its two largest components -- Apple and Microsoft -- account for about 23% of the total portfolio.

The iShares Russell 2000 ETF (NYSEMKT: IWM) tracks the Russell 2000 Index of small-cap stocks, those ranked from 1,000 to 3,000 by market cap on the U.S. exchanges. (Market cap is the share price multiplied by the number of outstanding shares.) This ETF, and the index it mirrors, has lagged the large-cap S&P 500 over the past 15 years, with a total return of about 166% to 237%, respectively, but that's still more than double your money over the long run.

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The Vanguard Real Estate ETF (NYSE: VNQ) seeks to track the MSCI US REIT Index. REITs, or real estate investment trusts, own portfolios of income-producing property, from cell towers to shopping centers to hospitals to self-storage businesses and other warehouses. The ETF holds about 160 REITs at any time and, while lagging some of the big indexes in total return over the years, consistently provides a much higher dividend yield, currently about 3.3%.

ALSO READ: Are REITs a Good Investment?

The T. Rowe Price U.S. Treasury Long-Term Index Fund (NASDAQMUTFUN: PRULX) tracks the Bloomberg U.S. Long Treasury Bond Index. This portfolio of U.S. Treasury securities with maturities of 10 years or more is a good example of an investment aimed at income and capital protection more than growth. It currently yields about 2.4%.

The Vanguard Tax-Exempt Bond Index Fund Admiral Shares (NASDAQMUTFUN: VTEAX) tracks the S&P National AMT-Free Municipal Bond Index. The income it spins off is generally tax-free, including from the federal alternative minimum tax, and it's currently yielding about 3.2%.

ALSO READ: How to Invest in Municipal Funds

The First Trust Nasdaq Oil & Gas ETF (NYSEMKT: FTXN) is one of a large selection of index funds that track the energy industry with various benchmarks, in this case, the Nasdaq US Smart Oil & Gas Index. Buying shares of this ETF is a way to invest in a diverse array of oil and gas industry participants without studying individual stocks. It's a hot sector right now, and this ETF has doubled the S&P 500 in total return in the past three years.

The Invesco S&P 500 Equal Weight Utilities ETF (NYSEMKT: RYU) tracks the S&P Equal Weight Utilities Index, which includes many of the nation's largest providers of electricity and gas to homes and businesses. These are typically considered generally safe, defensive stocks, and this ETF's share price is actually up this year, about 4%, during a roaring bear market, and it's yielding about 2.2%.

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The Calvert International Responsible Index Fund (NASDAQMUTFUND: CDHIX) is a mutual fund that tracks that investment firm's own Calvert International Responsible Index, which focuses on the performance of large, non-U.S. companies in developed markets that meet its environmental, social, and governance (ESG) standards. This fund has delivered about a fourth of the total return of the S&P 500 since its 2015 inception, but it's still in the green.

ALSO READ: What Is ESG Investing and What Are ESG Stocks?

The Schwab International Index Fund (NASDAQMUTFUND: SWISX) is a 25-year-old mutual fund that currently holds about 800 stocks from large companies based in Europe, Australia, and Asia. This fund tracks the MSCI EAFE Index and is currently yielding about 4.2%, making it an income play and a way to provide long-term international exposure to a U.S.-focused portfolio.

The wide range of choices among index funds allows investors to put their money into industries they find promising or the broadest markets. You also can choose between ETFs and mutual funds, sometimes with the same managers offering both choices.

Either way, index funds are a great choice for both active investors and those who don't want to think about it and let the professionals do their thing. The market is tanking now, but it's always bounced back higher than before, eventually, and these funds can position you nicely for that bounce for years to come.

Marc Rapport has positions in Vanguard Real Estate ETF. The Motley Fool has positions in and recommends Apple, Microsoft, and Vanguard Real Estate ETF. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.