Low-cost index funds and diversified portfolios are considered the best for the long term. However, not all index funds, especially specialized funds, are well diversified, and therefore they are not always ideal for long-term investors to hold on their own. Instead, they can contribute to the diversification of a broader portfolio that contains other index funds that do not overlap with that specialized category.
Best S&P 500 Index Funds
One of the most well-known types of index funds invests in the S&P 500, which is a stock index representing about 500 of the largest companies in the United States by market capitalization. Market competition has led to improved quality of funds. While it is not exactly a specialized category, an entire industry has grown around creating competitive S&P 500 funds.
Best Total Stock Market Index Funds
A total stock market fund that invests in thousands of stocks may be more appealing if getting exposure to more than 500 large U.S. stocks isn’t enough for you. Schwab’s total stock market fund includes large, mid, and small U.S. companies.
Best Aggressive Stock Index Funds
You may find aggressive stock index funds attractive if you are investing for the long term and don’t mind your account balance fluctuating over the short term.
Bond Index Funds
Bond funds are suitable for anyone looking to achieve a diversified portfolio of mutual funds. Index funds are a way to capture a large part of the bond market with a low-cost investment.
Balanced Index Funds
Balanced index funds provide the best way to achieve a diversified mix of stocks and bonds in just one fund. The Vanguard Balanced Index Fund is a strong fund that contains a balanced mix of stocks and bonds.
Frequently Asked Questions
Are there advantages of index funds over stocks?
Are there drawbacks to investing in index funds?
Sources:
Fidelity. “Fidelity 500 Index (FXAIX).”
Charles Schwab Asset Management. “Schwab S&P 500 Index (SWPPX).”
Charles Schwab Asset Management. “Schwab Total Stock Market Index Fund (SWTSX).”
Vanguard. “Vanguard Growth Index Admiral Shares (VIGAX).”
Vanguard. “Vanguard Growth ETF (VUG).”
Fidelity. “Fidelity Nasdaq Composite Index (FNCMX).”
Vanguard. “Vanguard Mid-Cap ETF (VO).”
Vanguard. “Vanguard Mid-Cap Index Admiral Shares (VIMAX).”
Vanguard. “Vanguard Total Bond Market ETF (BND).”
Vanguard. “Vanguard Total Bond Market Index Admiral Shares (VBTLX).”
Fidelity. “Fidelity Total Bond Fund (FTBFX).”
Vanguard. “Vanguard Balanced Index Admiral Shares (VBIAX).”
Source: https://www.thebalancemoney.com/best-index-funds-for-long-term-investors-4097828
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