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Key Points
- The best index funds let investors earn attractive returns from major indexes such as the S&P 500, Nasdaq-100, and Dow Jones Industrial Average with little effort.
- Index funds provide diversification and reduce the risks of investing in individual stocks, but their broad exposure also means some individual stocks can dramatically outperform them.
- Investors who successfully identify and invest in outperforming stocks have the potential to generate returns well above the average returns offered by index funds.
Index funds can be a great way to invest in the stock market, and the best index funds allow you to earn attractive returns. The largest and most popular index funds track major stock indexes such as the Standard & Poor’s 500 (“S&P 500”) and the Nasdaq 100 Index.
The S&P 500, Nasdaq 100, and Dow Jones Industrial Average are stock indexes that include America’s largest publicly traded companies and come with a strong long-term track record. The funds based on these stock indexes deliver nearly the same return as the indexes themselves. So, they’re an attractive way to achieve the index’s return with minimal analysis and work.
Top index funds also typically charge low expense ratios, the annual cost of the fund as a percentage of your investment. Top funds might charge $2 to $3 annually for every $10,000 invested in a fund, so you’re not paying a lot for the fund’s advantages. Index funds can charge low fees because they’re passively managed, meaning that they simply replicate the stocks in the index rather than paying analysts to actively find and invest in stocks.
Here are the best index funds for the major indexes, including both exchange-traded funds (“ETFs”) and mutual funds.
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Top S&P 500 Index Funds in 2026
| Fund (ticker) | Five-year annual returns | Expense ratio | Minimum investment |
| Fidelity ZERO Large Cap Index (FNILX) | 12.9% | 0% | None |
| Vanguard S&P 500 ETF (VOO) | 13.1% | 0.03% | None |
| SPDR S&P 500 ETF Trust (SPY) | 13.1% | 0.095% | None |
| iShares Core S&P 500 ETF (IVV) | 13.1% | 0.03% | None |
| Schwab S&P 500 Index Fund (SWPPX) | 13.1% | 0.02% | None |
| Vanguard 500 Index Fund Admiral Shares (VFIAX) | 13.1% | 0.04% | $3,000 |
| Fidelity 500 Index Fund (FXAIX) | 13.2% | 0.015% | None |
These funds track the S&P 500, which includes around 500 of the largest stocks traded on American exchanges, such as Nvidia (NVDA) and Apple (AAPL). So, it shouldn’t be surprising that these funds have basically the same average annual return of 13.1% over the previous five years. Therefore, the key differentiator here is the fund’s expense ratio, which ranges from 0% to 0.095%.
While ETFs are usually available to buy and sell wherever you can trade stocks, not all brokerages give you access to the entire mutual fund universe. Mutual funds often charge a minimum initial investment, too.
Three of these S&P 500 funds are ETFs, while four are mutual funds. Just one fund – the Vanguard mutual fund – charges a minimum investment, while its counterpart – the Vanguard S&P 500 ETF – charges a lower expense ratio and does not have a minimum investment. So, it makes sense to buy the Vanguard ETF or another lower-cost ETF unless you can’t access them.
Some of these funds also appear on this year’s list of the best ETFs.
Top Nasdaq Funds in 2026
| Fund (ticker) | 5-year annual returns | Expense ratio | Minimum investment |
| Invesco QQQ Trust (QQQ) | 14.9% | 0.18% | None |
| Invesco Nasdaq 100 ETF (QQQM) | 14.9% | 0.15% | None |
| Victory Nasdaq-100 Index Fund (USNQX) | 14.6% | 0.42% | $3,000 |
| Fidelity Nasdaq Composite Index ETF (ONEQ) | 13.3% | 0.21% | None |
These funds track the Nasdaq, with three following the Nasdaq 100, which includes the 100 largest non-financial firms on that exchange. The other fund tracks the Nasdaq Composite, which measures the performance of all stocks trading on that Nasdaq exchange, including Microsoft (MSFT) and Amazon (AMZN).
While the Invesco QQQ Trust has long been the most popular ETF, the recently introduced Invesco Nasdaq 100 ETF has delivered the same performance at a lower expense ratio.
Meanwhile, the Victory Nasdaq-100 index fund is a mutual fund tracking the Nasdaq 100 and requires a $3,000 minimum investment. The Fidelity fund here tracks the Nasdaq Composite rather than the Nasdaq 100, giving it broader exposure and less concentration in the largest tech stocks.
The Nasdaq Exchange includes the world’s largest tech companies, such as the recently debuted SpaceX (SPCX). (CEO Elon Musk is working on a way to disrupt the global financial system, here’s how.)
Top Dow Jones Industrials Funds in 2026
| Fund (ticker) | Five-year annual returns | Expense ratio | Minimum investment |
| SPDR Dow Jones Industrial Average ETF Trust (DIA) | 10.6% | 0.16% | None |
| Invesco Dow Jones Industrial Average Dividend ETF (DJD) | 11.9% | 0.07% | None |
Fewer funds track the Dow Jones Industrial Average and its 30 stocks, including Goldman Sachs (GS) and Caterpillar (CAT). The SPDR Dow Jones Industrial Average ETF is the key name to watch here. Meanwhile, the Invesco ETF here focuses only on dividend-paying stocks in the Dow Jones Industrials.
Investors looking for more dividend-paying investments should review the best dividend ETFs.
Which Index Fund Is Best for You?
In general, if you’re searching for an index fund for a major index such as the S&P 500 or Nasdaq 100, you have several fund choices. Since funds tracking the same index deliver very similar performance, the best pick is often the one with the lowest expense ratio.
Any of the funds on these lists are cheap or reasonably priced. The S&P 500 funds here offer the lowest expense ratios overall, but even funds in other categories are still fairly priced.
If you go with the Fidelity ZERO fund above, which charges no expense ratio, it’s important to know it does so by avoiding the S&P branding and the related fees. The fund still tracks the index, but Fidelity can’t market it as an S&P 500 fund.
In general, unless you need to buy a mutual fund – say, you’re investing in a retirement account – an ETF is often the better choice. They tend to have a lower expense ratio and don’t require a minimum initial investment, unlike mutual funds. Plus, they trade throughout the market day, unlike mutual funds, which are priced and traded only at the end of the day.
As mentioned above, not all mutual funds are available at all brokers. For example, the Fidelity fund with no expense ratio is not available at many brokers. However, any of the ETFs above should be available at any broker that offers stock trading.
Reasons to Invest in an Index Fund
The key advantage of an index fund is that investors can earn strong returns without spending much time or energy analyzing stocks.
Investors in an S&P 500 Index fund get exposure to the 500 or so stocks in that index, and the funds closely track the index’s performance, which has been about 10% over long periods and even more recently. Each share of the index fund lets investors own a small slice of all the companies in the index, and it charges one low management fee that is deducted seamlessly from the account.
Index funds offer immediate diversification, lowering the risk of investing in an individual stock. Diversification is the idea that your money is spread out across many different investments, so that the performance of one stock doesn’t hurt your overall performance too much.
Of course, there’s a flip side to diversification, too. An index fund’s performance is just the weighted average performance of all the stocks in it. So, it’s necessarily an average. In other words, some stocks will perform much better than the average.
If you can find outperforming stocks, your overall return can do drastically better than an index fund’s average. So, it can be worth your time and money to search out high-flying stocks.
Regards,
James Royal, PhD
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