6 Best Low-Cost Index Funds

Low-cost index funds

Low-Cost Index Funds

When it comes to investing, for the majority of people, low-cost index funds are the way to go. Low-cost index funds offer the following advantages.

An index fund is like a basket of stocks that you can buy into. When you buy a share of that fund, you own a small portion of the basket of stocks.

  • Broad diversification of stocks ranging from 500 to thousands
  • Low-cost, most funds costs 0.04 % or lower
  • No front-load or after-load fees
  • Low turn over rates
  • Good for retirement accounts such as 401k or Roth IRA
  • You own the market so you don’t have to pick a winner on a consistent basis to make meaningful gains


  • The high cost of entry: Vanguard index funds have a minimum of $3,000 to open, you can overcome this by buying the equivalent ETF
  • Follow fluctuations of the market
  • Risk of losing value
  • Best for long-term buy and hold strategy

In a previous post, I listed my favorite Vanguard index funds so I thought in this post I’ll expand my horizons and include non-Vanguard funds for comparisons.

Here are the top 5 best low-cost index funds on the market right now.

Vanguard 500 Index Fund Admiral Shares (VFIAX)

Vanguard|Yahoo Finance|Morningstar

This fund tracks the S&P 500, which means you buy into the usual bigs in the U.S. like Apple, Google, Amazon, Facebook, Microsoft, etc…

The return of investment matches that of the S&P 500 and the return for the last 10 years is 13.95%.

Downsides to this fund:

There is a $3,000 minimum to open an account and buy this fund. As mentioned above, you can buy the ETF version of this fund VOO that does not have a minimum to invest in.

VOO has a slightly lower expense ratio of 0.03%. One of the disadvantages of VOO is that they don’t allow automatic investment like

The expense ratio of 0.04%, which is equivalent to $4 per year for every $10,000 invested. This is in fact really really but as you can see from this list, there are more cost-effective alternatives.

Although in the big scheme of things a few dollars or a few basis points will not make a significant difference in your rate of return.

Vanguard is the pioneer of low-cost index funds and they’ve been around since 1975 and have had a good track of success in its index funds.

Vanguard Total Stock Market Index Fund (VTSAX)

Vanguard|Yahoo Finance|Morningstar

Without dispute, this is my favorite low-cost index funds. This fund is unique because it captures the entire US stock market. Large-cap, mid-cap, small-cap you name it. Some even argue that VTSAX also captures the international market because a lot of US companies also have sizable operations overseas.

This fund will give you exposure to 3,529 stocks in the United States.

Sure, there is a chance that the S&P 500 and therefore VFIAX might perform better but also the chance that VTSAX might have better returns.


$3,000 minimum investment requirement. As mentioned above, you can bypass this requirement by buying the ETF equivalent of this fund, VTI.

The expense ratio is 0.04% versus 0.03% with VTI.

Charles Schwab S&P 500 Index Fund (SWPPX)

Schwab|Yahoo Finance|Morningstar

This fund from Charles Schwab is similar to the Vanguard 500 Index Fund in that it also track the S&P 500 index.

However, there are some differences:

As opposed to a $3,000 minimum with Vanguard, this fund rom Schwab has no minimum requirement.

The expense ratio comes in lower at 0.02% which is half of Vanguard’s 0.04%.

When it comes to investment returns, Vanguard had 13.95% return in the last 10 years versus Schwab at 13.90%.

Charles Schwab Total Stock Market Index (SWTSX)

Schwab|Yahoo Finance|Morningstar

The name of the fund indicate that it is similar Vanguard’s VTSAX.

However, there are a few minor differences. VTSAX has approximately 3,529 stocks versus 3,124 for SWTSX.

The expense ratio is lower at 0.03%.

Overall, this is an excellent alternative to VTSAX if you have a brokerage account with Charles Schwab or TD Ameritrade since they just announced their merger.

Fidelity 500 Index Fund (FXAIX)

Fidelity|Yahoo Finance|Morningstar

This is Fidelity’s version of the S&P 500 index fund.

Fidelity has been aggressive of late because they are lowering fees, making them more competitive with old guards like Vanguard.

Fidelity is using these low-cost index funds as a loss leader where they will take the loss so that they can reel you in. Once you’re a customer they hope that you will consider and use the other services that will generate revenue for them.

After all, they are a for profit company. As the old saying goes, “There’s no such thing as a free lunch.”

Expense ratios is ridiculously low at 0.015% and this fund has no investment minimum.

Low-Cost Index Funds: Fidelity ZERO International Index Fund (FZILX)

Fidelity|Yahoo Finance|Morningstar

This is an international index fund. An international fund is one of the tenets of a three-fund portfolio. The idea is that an international fund will be more positioned to capture emerging markets and foreign markets that could do well in the next few decades.

This fund has no minimum and it has a 0% expense ratio.

Low-Cost Index Funds: Fidelity ZERO Total Market Index Fund (FZROX)

Fidelity|Yahoo Finance|Morningstar

Similar to VTSAX, Fidelity’s FXROX is the same thing, the total stock market.


  • No minimum
  • Zero expense ratio

It’s not a lot when you’re only investing $10,000 since an expense of 0.04 at Vanguard will cost you $4. However, if you have $1 million, then you can save up to $400!

Low-Cost Index Funds: Fidelity ZERO Large Cap Index Fund (FNILX)

Similar to other S&P 500 index funds with no fees and no minimum.

Low-Cost Index Funds Summary

Index funds with Vanguard has the name recognition and brane name behind it.

Overall, you can’t go wrong with any of these choices. You can stick with one fund, a total stock market fund, or diversify and add in an international and total bond fund. You will have to rebalance your portfolio according to your risk tolerance and time horizon and you’re set.

Investing should not be too complicated. Pick a good budget brokerage firm and pick a combination of low-cost index funds will set you on the right path in my opinion.