Investing in index funds is a smart and accessible way for beginners to enter the stock market. These funds offer diversification, low costs, and have historically provided solid returns. Here’s a guide to some of the top index funds to consider in 2025.
Top Index Funds for Beginners
1. Vanguard S&P 500 ETF (VOO)
This fund tracks the performance of the S&P 500 Index, representing 500 of the largest U.S. companies. It’s known for its low expense ratio and broad market exposure.
Forbes
Key Features:
- Expense Ratio: 0.03%
- Holdings: Apple, Microsoft, Amazon, and other major corporations
- Investment Objective: Seeks to replicate the performance of the S&P 500 Index
2. iShares Core S&P 500 ETF (IVV)
Similar to VOO, this ETF also tracks the S&P 500 Index and is favored for its liquidity and low costs.
U.S. News Money
Key Features:
- Expense Ratio: 0.03%
- Holdings: Diversified across all sectors of the S&P 500
- Investment Objective: Offers exposure to large-cap U.S. equities
3. Vanguard Total Stock Market ETF (VTI)
This fund provides exposure to the entire U.S. equity market, including small-, mid-, and large-cap stocks.
The Motley Fool
Key Features:
- Expense Ratio: 0.03%
- Holdings: Over 3,500 stocks, offering comprehensive market coverage
- Investment Objective: Seeks to track the performance of the CRSP US Total Market Index
4. Schwab U.S. Broad Market ETF (SCHB)
This ETF offers broad exposure to the U.S. equity market with a focus on affordability.
Vending Lab
Key Features:
- Expense Ratio: 0.03%
- Holdings: Approximately 2,500 stocks across various sectors
- Investment Objective: Tracks the Dow Jones U.S. Broad Stock Market Index
5. Vanguard Total Bond Market ETF (BND)
For those looking to balance their portfolio with bonds, this ETF provides exposure to the U.S. investment-grade bond market.
Vending Lab
Key Features:
- Expense Ratio: 0.035%
- Holdings: A mix of U.S. government and corporate bonds
- Investment Objective: Seeks to track the performance of the Bloomberg U.S. Aggregate Float Adjusted Index
Why Choose Index Funds?
- Diversification: Investing in a single index fund can provide exposure to a wide range of companies and sectors, reducing risk.
- Low Costs: Index funds typically have lower expense ratios compared to actively managed funds, meaning more of your money is invested.
- Simplicity: They offer a straightforward way to invest without the need to pick individual stocks.
FAQs
What is an index fund?
An index fund is a type of mutual fund or ETF designed to replicate the performance of a specific market index, such as the S&P 500.
How much money do I need to start investing in index funds?
Many index funds have low minimum investment requirements, and some brokerages offer the ability to purchase fractional shares, allowing you to start with modest amounts.
Are index funds safe investments?
While no investment is entirely risk-free, index funds are generally considered less risky than individual stocks due to their diversified nature.
How do I choose the right index fund?
Consider factors such as your investment goals, risk tolerance, expense ratios, and the specific index the fund tracks.
Can I lose money investing in index funds?
Yes, since index funds mirror the performance of the market, they can lose value during market downturns. However, over the long term, they have historically provided positive returns