2026년 2월 22일 · Unknown · financial · 출처 Yahoo Finance
Key takeaways
Low-cost index mutual funds and exchange-traded funds (ETFs) are a great way to invest in the market, giving you a diversified fund with low expenses. Index funds are passive funds that track an established index, making changes only when the index itself changes, rather than actively trying to beat the market. Index funds are appropriate for all kinds of investors, but they can be especially valuable for less experienced investors.
A low-cost index fund can be a great way for both beginner and advanced investors to invest in the stock market. These funds generally are broadly diversified, thus reducing your risk compared with investing in individual stocks, and they’re a great choice if you want to minimize the time you spend investing, too. On top of that, index funds can offer attractive returns, in part by reducing the fees you pay.
With all these advantages, it’s little wonder that legendary investor Warren Buffett recommends index funds (notably a Standard & Poor’s 500 index fund) to most investors.
Here’s more information on how index funds work and a list of some of the cheapest index funds on the market.
How do index funds work
An index fund is an investment fund that tracks a specific collection of assets called an index. The index can include stocks, bonds and other assets, including commodities such as gold. The most well-known index is the Standard & Poor’s 500 index (S&P 500).
An index fund is a passive investment that tracks the assets included in the index. It aims to match the performance of the index by holding the same assets in the same proportions as the index.
An index fund can be bought and sold as either an exchange-traded fund (ETF) or a mutual fund. (Here’s the difference between ETFs and mutual funds.)
Learn more: Active investing vs. passive investing: What's the difference
What are the major U.S. indexes?
Index funds can track any market index. Here are some of the most popular stock indexes.
S&P 500: The S&P 500 index tracks around 500 of the largest companies in the U.S. Dow Jones Industrial Average: The Dow Jones Industrial Average is often referred to in the financial media and tracks 30 of the largest companies in the U.S. Nasdaq Composite: The Nasdaq Composite measures the performance of more than 3,000 companies listed on the Nasdaq stock market and is known for its heavy exposure to the technology sector. Nasdaq 100: The Nasdaq 100 index measures the performance of the 100 largest non-financial companies on the Nasdaq exchange, making it another tech-heavy index. Russell 2000: The Russell 2000 tracks the performance of around 2,000 of the smallest publicly traded companies in the U.S. Russell 3000: The Russell 3000 is a broad stock market index that tracks the performance of about 98% of the investable U.S. stock market.
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What makes an index fund low-cost?
A fund management company charges investors for creating and managing the fund using what’s called an expense ratio. The expense ratio tells you what percent of your investment you’ll pay as a fee to the fund company. For example, a low-cost index fund might charge an expense ratio of 0.06%. That means you’d pay a fee of $6 annually for every $10,000 you invested in the fund.
Whether a fund is low cost is relative. Fund costs have been declining for decades, and today investors can easily find funds charging an expense ratio below 0.50%, or a cost of about $50 annually for every $10,000 invested. But the best index funds charge much less than that, often less than 0.10%, or about $10 annually for every $10,000 invested.
Another cost to watch out for is a sales load. The sales load is basically a commission to the salesperson, and it’s money that comes right out of your pocket. The good news is that it’s easy to avoid this cost, since many fund management companies offer no-load funds. And it’s a fee that applies only to mutual funds, so if you’re buying an ETF, you can rest easy here.
How to invest in low-cost index funds
1. Determine the type of fund you want
First, you’ll need to determine what your investing goals are.
Are you investing for the highest-possible returns over a long timeframe and can ride out short-term volatility? Then you’ll want a stock index fund. Are you investing for more steady returns at the cost of a lower total return? Then you might want to consider a bond index fund.
For any stock investment, you should be able to leave your money invested at least three to five years without touching it in order to earn potentially higher returns. In the short term, stocks can be volatile, though they do well over time.
Learn more: 3 steps to set your investment goals
2. Research available index funds
Once you know the type of fund you want, you can start your research, looking for either stock index funds or bond index funds, or both. For your search, you can turn to free screeners such as those at Morningstar, which has separate screens for ETFs and mutual funds.
You can filter the funds by their expense ratio and then sort them by their returns, often over periods such as one year, three years, five years and 10 years. The lowest-cost funds charge less than 0.10% as an expense ratio.
You’ll also need to see if the fund is an index fund or an actively managed fund. Almost all ETFs are index funds, while a much smaller percentage of mutual funds are index funds. You’ll need to look further to determine if a mutual fund is an index fund, though it often says so in the fund’s name. Also, a stringent screen for low-cost funds likely eliminates most actively managed and non-index mutual funds anyway.
It can be valuable to stick to broadly diversified funds — ones that own many investments across industries — to reduce your overall portfolio risk.
3. Place your trade
Once you’ve determined the fund you want, you can place your trade. To do so, you’ll need to know the fund’s ticker symbol, a three-, four- or five-letter code, whic…