7 best index funds to buy in 2024

By:

Prash Raval

Prash is a financial writer for Invezz covering FX, the stock market and investing. For over a decade he has traded spot FX full time while... read more.

Updated: Oct 3, 2023

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Our investment experts have researched the top index funds available today. This guide compares the best index funds to buy in 2024. Read on to learn more about index fund investing and find out which funds our experts ranked the best. 

What are the 7 top index funds to buy?

1. Vanguard S&P 500 ETF (VOO)
2. Vanguard Total Stock Market ETF (VTI)
3. SPDR Dow Jones Industrial Average ETF Trust (DIA)
4. Shelton NASDAQ-100 Index Direct (NASDX)
5. Vanguard Total International Stock Index Fund Admiral Shares (VTIAX)
6. SPDR S&P Dividend ETF (SDY)
7. Schwab Emerging Markets Equity ETF (SCHE)

The best index funds, compared

1. Vanguard S&P 500 ETF (VOO)

Key details

• Date created: September 7, 2010
• Expense ratio: 0.03%
• 5-year return: 10.98%
• Minimum investment amount: $1
• Dividend yield: 1.49%
• Risk level: Moderate

The Vanguard S&P 500 ETF (VOO) is one of the most popular index funds which tracks the performance of the S&P 500 index. It’s an ETF and its primary goal is to follow the investment returns of the S&P 500 index closely. 

VOO is one of the top S&P 500 index fund around and is comprised of 503 stocks ensuring the fund captures a broad representation of the index. It includes companies from various industries and sectors covering many segments of the U.S. economy. It is also one of the best low cost index funds due to its low expense ratio.

2. Vanguard Total Stock Market ETF (VTI) 

Key details

• Date created: November 1, 2001
• Expense ratio: 0.03%
• 5-year return: 13.59%
• Minimum investment amount: $1.00
• Dividend yield: 1.36%
• Risk level: Moderate

The Total Stock Market exchange traded fund (ETF) is one of the top Vanguard index funds for gaining exposure to the whole U.S. stock market. The ETF tracks the performance of the CRSP US Total Market Index, which covers all U.S. stocks, including large, mid, and small cap companies. 

VTI is passively managed, which means it does not aim to beat the market but match its performance. It’s a top choice for investors wanting exposure to the broader United States economy. 

3. SPDR Dow Jones Industrial Average ETF Trust (DIA)

Key details

• Date created: January 18, 1998
• Expense ratio: 0.16%
• 5-year return: 12.55%
• Minimum investment amount: None
• Dividend yield: 1.44%
• Risk level: Moderate

SPDR Dow Jones Industrial Average ETF Trust (DIA) is a fund of 30 prominent U.S. companies that mirrors the performance of the Dow Jones Industrial Average (DJIA). DIA operates as a passively managed fund, aiming to closely track the market rather than outperform it. 

With a low expense ratio of 0.16%, DIA offers a cost-effective approach for investing in the DJIA. It is suitable for long-term investors seeking moderate risk exposure aligned with the DJIA.

4. Shelton NASDAQ-100 Index Direct (NASDX)

Key details

• Date created: February 28, 2001
• Expense ratio: 0.50%
• 5-year return: 15.29%
• Minimum investment amount: $1,000
• Dividend yield: 1.00%
• Risk level: High

NASDX is an ETF that tracks the performance of the NASDAQ 100 Index, which includes the 100 largest non-financial companies listed on the Nasdaq Stock Market. NASDX follows a passive approach, aiming to replicate the returns of the NASDAQ-100 Index rather than trying to outperform it. 

Compared to other ETFs, NASDX has a high expense ratio of 0.50%; however, it has a long track record of delivering returns that often outperform the market. This makes it a top option for investors seeking high growth. 

5. Vanguard Total International Stock Index Fund Admiral Shares (VTIAX)

Key details

• Date created: December 1, 1998
• Expense ratio: 0.11%
• 5-year return: 11.24%
• Minimum investment amount: $3,000
• Dividend yield: 1.36%
• Risk level: Moderate

The Vanguard Total International Stock Index Fund Admiral Shares is an index fund that operates on a passive management strategy. It aims to track the performance of the FTSE Global All Cap ex US Index. 

It includes stocks from both developed and emerging markets outside of the United States. VTIAX is one of the best ways to gain exposure to global markets, excluding the U.S. as it comprises nearly 4,000 stocks. 

6. SPDR S&P Dividend ETF (SDY)

Key details

• Date created: November 8, 2005
• Expense ratio: 0.35%
• 5-year return: 12.48%
• Minimum investment amount: None
• Dividend yield: 3.07%
• Risk level: Moderate

The SPDR S&P Dividend ETF is the best index fund for investors focused more on income as opposed to growth. SDY closely follows the performance of the S&P High Yield Dividend Aristocrats Index. This index comprises 65 U.S. companies renowned for consistently increasing their dividends for at least 20 years.

With a modest expense ratio of 0.35%, SDY provides investors with a cost-effective and accessible avenue to invest in the S&P High Yield Dividend Aristocrats Index. SDY is also on the smaller side in terms of holdings, with only 65 stocks comprising the ETF. 

7. Schwab Emerging Markets Equity ETF (SCHE)

Key details

• Date created: March 8, 2000
• Expense ratio: 0.15%
• 5-year return: 10.56%
• Minimum investment amount: None
• Dividend yield: 1.87%
• Risk level: High

SCHE is an ETF designed to provide investors with a cost-effective avenue for participating in the FTSE Emerging Index. This index comprises large and mid-cap companies from emerging market countries, as determined by FTSE. SCHE, has a low expense ratio of 0.15%, and aims to replicate the performance of the FTSE Emerging Index closely.

It is important to note that SCHE carries a higher risk level compared to other funds in our list due to its focus on emerging markets. SCHE boasts a well-diversified portfolio with 1,043 holdings.

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What is an index fund?

An index fund is a type of mutual fund that aims to replicate the performance of a specific market index, like the S&P 500 or Nasdaq. Rather than being actively managed, index funds track the securities in a given index.

Some examples are the Fidelity Index World Fund, which mirrors the MSCI World Index, and S&P 500 index funds that match the S&P 500. Index funds tend to have lower fees than actively managed funds because no stock picking or trading is required by the fund manager.

The best index funds offer investors low-cost exposure to broad market sectors or asset classes. By tracking indexes like the S&P 500, index funds provide returns similar to the overall financial market. They are essentially investments in the total market. Exchange traded funds and traditional open-end mutual funds can both be index funds.

Investing in index funds provides instant diversification with minimal investment costs. Since index funds match an index’s holdings, there is low turnover in the portfolio. Most index funds outperform comparable actively managed funds over the long run.

How much do index funds cost?

For most passive funds the cost is less than 0.5% per year. Each index fund charges an annual maintenance or management fee, which is referred to as the fund’s ‘expense ratio’ and given as a percentage of your investment. 

For active funds, you may have to pay 0.75% or more. That type of mutual fund is run by active managers, so you’re paying for the time and expertise of the fund managers who decide which stocks to invest in.

In addition, you may have to pay a trading fee when you buy or sell a stake in a mutual fund. Some trading platforms charge a fee each time you make an investment. This varies depending on the brokerage you use; most services don’t charge any commission, others charge a couple of pounds each time.

How to choose the right funds for you

Our experts ranked the best index funds based on a range of factors, from the annual running cost to the risk profile of each fund. You should use the same features to pick the mutual funds that suit your expectations and investment goals.

• Annual management fee. Each mutual fund charges an annual fee as a percentage of your investment. Passive funds tend to be cheaper, while active funds are more expensive. When you invest in the best index funds, you’re normally looking to buy and hold for a few years. Small fee differences can add up to a big variation in returns over the long term, so you should favour mutual funds with the lowest maintenance fees.
• Fund size. The more money in an index fund, the more stable its performance is likely to be. Funds with low assets under management (AUM) can rely too heavily on the performance of one or two stocks and lack the diversification investors want. 
• Index fund weighting. Each index fund tracks a stock market index, but there can be big differences in how the fund tracks its benchmark index. Pay close attention to the weighting in particular. An index fund that scales its weighting so that a larger percentage, say 10%, goes into one or two stocks is going to be far more affected by the performance of those companies than one which invests 5% in all stocks equally.
• Risk profile. Each index fund factsheet has to report its risk profile on a scale between 1 and 7, with 7 being the riskiest. This synthetic risk and reward measure (SRRI) is an industry standard that you can use to compare risk across asset management companies. Less risk is better, but many people choose to have a balance of different risk profiles in their portfolio, as the riskier ones can generate higher returns (as well as higher losses).
• Hedging and currency risk. Every index fund is denominated in a particular currency, such as GBP or USD. That means that fluctuations in the strength of that currency can act as a drag or boost on performance. If your fund is in GBP and the pound is weak relative to USD, that means the fund will underperform the same fund denominated in USD. Some index funds hedge their currency risk to avoid this, others don’t.
• Share class. Some funds generate income from dividends. For these types of funds there are two share classes: income and accumulation. The former means that any income is paid out automatically, while accumulation means the money is automatically reinvested. Accumulation is more convenient, while income means you might build up spare cash in your brokerage account. An index fund can be one or the other, while some offer a choice between both.

Are index funds a good investment?

Yes, index funds can be a smart choice for investors looking to grow their portfolios steadily over the long term. Index funds offer several advantages over picking stocks yourself. When investing in an index fund you’ll gain broad market exposure, allowing you to participate in the overall performance of a particular index, sector, or industry. 

This diversification helps spread risk and reduces the impact of any single company’s performance. Index funds also have lower expense ratios compared to actively managed funds, meaning it will cost you less to invest and you can keep more of your returns. 

By tracking an index rather than attempting to beat the market, index funds offer a more passive and cost-effective approach to investing. You’ll need to use a broker that offers these markets to buy the best index funds. You can click the button below to visit our expertly selected list of the best brokers for index funds.

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