An index fund is an investment fund – either a mutual fund or an exchange-traded fund (ETF) – that is based on a preset basket of stocks, bonds, or other securities. The goal of an index fund is to replicate the performance of a specific market index, such as the S&P 500 or the Dow Jones Industrial Average. Index funds are an easy, low-fee way to invest. It might be the smartest and easiest investment you ever make.
In a challenging market, it helps to ignore day-to-day volatility. Index funds offer low-cost, long-term exposure to the stock market, making them ideal for investors who want to invest in stocks without the risk of individual stock picking.
If you're wary of efforts to game the tumultuous market and looking for a haven to park your investments for the long term, mutual funds and ETFs that track well-known indexes such as the S&P 500 or the NASDAQ can be a solid choice. These funds offer investors a diversified portfolio of stocks at a low cost, making them an ideal investment for long-term growth.
FSKAX and FXAIX are two popular mutual funds offered by Fidelity. FSKAX is a total U.S. stock market index fund that invests in a blend of large-, mid-, and small-cap stocks. FXAIX, on the other hand, tracks the S&P 500 index and invests in large-cap U.S. stocks. Both funds are low-cost, with expense ratios of 0.015% and 0.015%, respectively. Learn the differences between the two and which might be best for you.
S&P 500 index funds are an excellent way to get diversified exposure to the heart of the U.S. stock market. The S&P 500 is a broad index of 500 of the largest publicly traded U.S. companies, offering investors exposure to a wide range of industries and sectors. Index funds that track the S&P 500 are popular choices for investors who want to invest in the U.S. stock market without the risk of individual stock picking.
These mutual funds and ETFs earn Morningstar's top rating in 2023. Morningstar is a leading independent investment research firm that rates mutual funds and ETFs based on their long-term performance, risk, and expense ratios. Funds that earn a Morningstar rating of five stars are considered to be the best-performing funds in their category.
The launch of the first commercially viable index fund by the late John “Jack” Bogle, founder and chairman of the Vanguard Group in 1976, revolutionized the way investors approach the stock market. Bogle believed that the best way to invest in the stock market was to own a diversified portfolio of stocks at a low cost, rather than trying to pick individual stocks.
Index funds and exchange-traded funds (ETFs) are both great wealth-building tools that work well in many different investment scenarios. ETFs trade like individual stocks, making them a good choice for investors who want to trade frequently or who want to invest in specific sectors of the stock market. Index funds, on the other hand, are more passive investments that are designed to track a specific index, making them a good choice for long-term investors who want to invest in the overall stock market.
Overall, index funds are an excellent choice for investors who want to invest in the stock market without the risk of individual stock picking. By investing in a diversified portfolio of stocks at a low cost, investors can achieve long-term growth and build wealth over time. Whether you choose a mutual fund or an ETF, be sure to do your research and choose a fund that fits your investment goals and risk tolerance.
