The Best Index Funds (2024)

An index fund is an investment vehicle, either a mutual fund or an ETF, based on a preset collection of stocks, or an index. Fund managers replicate the index without active management. These funds track popular indexes, often mentioned in financial news as indicators of market performance.

Index funds are passive investments designed to mirror the performance of their underlying index, minus expenses. Active funds, on the other hand, are managed by professionals aiming to outperform the index.

The best index funds closely track their indexes, minimize costs, and follow sensible rules-based indexes. They help build wealth by diversifying portfolios while keeping fees low, reducing the risk compared to investing in individual stocks or bonds.

What is the Best Index Fund?

1. SMH: VanEck Semiconductor ETF
2. SOXX:
3. PSI:
4. XSD:
5. FTXL:
6. XLK:
7. IYW:
8. FTEC:
9. IXN:
10. VGT:

10. SPDR S&P 500 ETF Trust

The SPDR S&P 500 ETF Trust (SPY) is designed to measure the performance of the large-cap segment of the US equity market. It is float-adjusted market capitalization weighted.

• The SPDR S&P 500 ETF Trust seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the S&P 500 Index
• The S&P 500 Index is a diversified large cap U.S. index that holds companies across all eleven GICS sectors
• Launched in January 1993, SPY was the very first exchange traded fund listed in the United States

Top 10 SPY Holdings

9. IVV: iShares Core S&P 500 ETF

The iShares Core S&P 500 ETF (IVV) seeks to track the investment results of an index composed of large-capitalization U.S. equities.

• Exposure to large, established U.S. companies
• Low cost, tax efficient access to 500 of the largest cap U.S. stocks
• Use at the core of your portfolio to seek long-term growth

Top 10 IVV Holdings

8. Vanguard 500 Index Fund

Vanguard S&P 500 ETF (VOO) Invests in stocks in the S&P 500 Index, representing 500 of the largest U.S. companies.

• Goal is to closely track the index’s return, which is considered a gauge of overall U.S. stock returns
• Offers high potential for investment growth; share value rises and falls more sharply than that of funds holding bonds
• More appropriate for long-term goals where your money’s growth is essential

Top 10 VOO Holdings

7. SPLG: SPDR Portfolio S&P 500 ETF

The SPDR Portfolio S&P 500 ETF (SPLG) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P 500 Index.

• A low-cost ETF that seeks to offer precise, comprehensive exposure to the US large cap market segment
• The Index represents approximately 80% of the US market
• One of the low-cost core SPDR Portfolio ETFs, a suite of portfolio building blocks designed to provide broad, diversified exposure to core asset classes

Top 10 SPLG Holdings

6. iShares S&P 500 Growth ETF

The iShares S&P 500 Growth ETF (IVW) seeks to track the investment results of an index composed of large-capitalization U.S. equities that exhibit growth characteristics.

• Exposure to large U.S. companies whose earnings are expected to grow at an above-average rate relative to the market
• Low cost and tax efficient
• Use as a complement to a portfolio’s core holdings

Top 10 IVW Holdings

5. Invesco S&P 500 Quality ETF

The Invesco S&P 500 Quality ETF (SPHQ) is based on the S&P 500 Quality Index. The Fund will normally invest at least 90% of its total assets in common stocks that comprise the Index. The Index tracks the performance of stocks in the S&P 500 Index that have the highest quality score, which is calculated based on three fundamental measures, return on equity, accruals ratio and financial leverage ratio. The Fund and the Index are rebalanced and reconstituted semi-annually on the third Friday of June and December.

Top 10 SPHQ Holdings

4. Vanguard S&P 500 Growth Index Fund

Vanguard S&P 500 Growth Index Fund ETF Shares (VOOG) invests in stocks in the Standard & Poor’s 500 Growth Index, composed of the growth companies in the S&P 500.

• Focuses on closely tracking the index’s return, which is considered a gauge of overall U.S. growth stock returns
• Offers high potential for investment growth; share value rises and falls more sharply than that of funds holding bonds
• More appropriate for long-term goals where your money’s growth is essential

Top 10 VOOG Holdings

3. SPDR Portfolio S&P 500 Growth ETF

The SPDR Portfolio S&P 500 Growth ETF (SPYG) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P 500 Growth Index.

• A low cost ETF that seeks to offer exposure to S&P 500 companies that display the strongest growth characteristics
• The Index contains stocks that exhibit the strongest growth characteristics based on: sales growth, earnings change to price ratio, and momentum
• One of the low cost core SPDR Portfolio ETFs, a suite of portfolio building blocks designed to provide broad, diversified exposure to core asset classes

Top 10 SPYG Holdings

2. Invesco S&P 500 High Beta ETF

The Invesco S&P 500 High Beta ETF (SPHB) is based on the S&P 500 High Beta Index. The Fund will invest at least 90% of its total assets in the securities that comprise the Index. The Index is compiled, maintained and calculated by Standard & Poor’s and consists of the 100 stocks from the S&P 500 Index with the highest sensitivity to market movements, or beta, over the past 12 months. Beta is a measure of relative risk and is the rate of change of a security’s price. The Fund and the Index are rebalanced and reconstituted quarterly in February, May, August and November.

Top 10 SPHB Holdings

1. Invesco S&P 500 GARP ETF

Invesco S&P 500 GARP ETF (SPGP) is based on the S&P 500 Growth at a Reasonable Price Index. The Fund will invest at least 90% of its total assets in the component securities that comprise the Index. The Index is composed of approximately 75 securities in the S&P 500 Index that have been identified as having the highest “growth scores” and “quality and value composite scores,” calculated pursuant to the index methodology. The Index constituents are weighted based on their growth scores. The Fund and the Index are rebalanced and reconstituted semi-annually.

Top 10 SPGP Holdings

Why are Index Funds Popular?

The first index fund, Vanguard 500, debuted in 1976. Since then, funds tracking the US stock market have gained immense popularity, with international stock and bond index funds also becoming favored.

Many believe buying and holding the broad market yields better results than trying to outperform it by selecting individual securities. Research confirms that in many categories, index funds have outperformed active funds over time.

Index funds are attractive due to their broad ownership of stocks, diversification, lower risk, and low costs, making them especially appealing for beginners.

• Attractive Returns: Major indexes fluctuate but have shown solid long-term returns, such as the S&P 500’s average of about 10 percent annually
• Diversification: Index funds offer immediate diversification. For example, a single purchase of an S&P 500 index fund provides ownership in hundreds of companies
• Lower Risk: Due to diversification, index funds are less risky than investing in a few individual stocks
• Low Cost: Index funds often have low expense ratios, significantly impacting total returns

Considerations for Investing in Index Funds

• Long-Run Performance: Assess the fund’s long-term performance to gauge potential future returns
• Expense Ratio: Opt for the lowest expense ratio for funds tracking the same index
• Trading Costs: Some brokers offer better prices for buying mutual funds and ETFs usually trade without a commission
• Fund Options: Check if your broker offers access to specific funds
• Convenience: Choosing an ETF can offer broader accessibility

Index Fund Risks

Investing in market-based securities carries the risk of losing all your money if the issuing entity faces severe trouble. However, index funds, due to their diversification, mitigate this risk.

An index fund typically owns dozens, if not hundreds, of securities, making it highly diversified. For a stock index fund to lose everything, every stock in the index would have to become worthless, which is highly unlikely. However, index funds can underperform and lose money over years, depending on their investments.

Fees Associated with Index Funds

ETFs are becoming more popular due to their lower fees compared to mutual funds and other advantages. Index funds may charge different fees depending on their type:

• Mutual Funds: These may charge a sales load and an expense ratio.
• ETFs: ETFs usually charge only an expense ratio, with small daily deductions.

Is Now a Good Time to Buy Index Funds?

Buying a stock index fund, such as one based on the S&P 500, can be a good investment if you’re prepared to hold it long-term. The market generally rises over time with economic growth and increasing corporate profits. Adopting a patient investment approach can help navigate short-term volatility. Experts recommend regularly investing to leverage dollar-cost averaging and reduce risk. Avoid timing the market to capture gains and dodge losses.

Conclusion

Index funds offer a way to own a broad collection of stocks at low cost, with benefits of diversification and lower risk. They are ideal for long-term investing, such as in retirement accounts. While subject to market swings and lacking the flexibility of active management, index funds are favored for their consistent performance and are a staple in many investment portfolios. Consider your investment objectives and risk tolerance when choosing an index fund. Consulting a financial advisor for personalized advice is always prudent.

Advice	InvestCAN	InvestRESP	InvestUSA	RetireCAN	RetireMGN
$500.00 CAD $400.00 USD	$199.99 CAD $99.99 CAD	$49.99 CAD $17.99 CAD	$159.99 USD $79.99 USD	$199.99 CAD $99.99 CAD	$17.99 CAD $12.99 USD

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