Best index funds for the month of September 2022
Best index funds for the month of September 2022
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Index funds are mutual funds — mutual funds or exchange-traded funds (ETFs) — based on a preset basket of stocks or indices. The index can be created by the fund manager themselves or by other companies such as investment banks or brokerage firms.

These fund managers then mimic the index and create a fund that looks as similar to the index as possible without actively managing the fund. Over time, the index changes as companies are added and removed, and fund managers automatically replicate these changes across the fund.

Some of the most followed indexes appear in the financial news every night and are often used as shorthand for market performance, with investors following them to see how stocks are doing overall.

Most Popular Index:

Standard & Poor’s 500 Index (S&P 500)
Dow Jones Industry Average
Nasdaq Composite
Russell 2000
Here’s everything you need to know about index funds, including the ten best index funds to add to your portfolio this year.

Why are index funds a popular investment?

Index funds are popular with investors because they promise a broad range of stocks, greater diversification and lower risk—often all at low cost. For this reason, many investors, especially beginners, believe that index funds are better investments than individual stocks.

Impressive returns: Like all stocks, the most important indices are subject to volatility. But indices have produced decent returns over time, such as the S&P 500’s long-term record of about 10% per year. This doesn’t mean the index fund makes money every year, but it is the average return over the long term.
Diversification: Investors love index funds because they provide instant diversification. Investors can own a wide range of companies with a single purchase. Stocks in an S&P 500 index fund provide ownership of hundreds of companies, while stocks in a Nasdaq 100 index fund provide exposure to about 100 companies.
Low Risk: Because they are diversified, investing in index funds is less risky than owning a few individual stocks. That doesn’t mean you can’t lose money, or that they’re as safe as CDs, for example, but the index is usually much less volatile than a single stock.

Low Fees: Index funds charge few fees for these benefits and have low expense ratios. For larger funds, you might pay $3 to $10 per year for every $10,000 invested. In fact, a fund (listed above) will not charge you an expense ratio at all. With index funds, cost is one of the most important factors affecting your overall return.

While some funds, like the S&P 500 or Nasdaq 100 index funds, allow you to own companies across multiple industries, others only own specific industries, countries or even investment styles (such as dividend stocks).

The Best Index Funds to Invest in September 2022

The list below contains index funds from a variety of companies that track a variety of broadly diversified indices and includes some of the lowest-cost funds you can buy and sell on the open market. For index funds of this type, one of the most important factors affecting the overall return is cost. Includes three mutual funds and seven ETFs:

Fidelity Zero Market Index
Vanguard S&P 500 ETF
SPDR S&P 500 ETF Trust
iShares Core S&P 500 ETF
Schwab S&P 500 Index Fund
Shelton Nasdaq 100 Direct
Invesco QQQ Trust ETF
Vanguard Russell 2000 ETF
Vanguard Total Stock Market ETF
SPDR Dow Jones Industrial Average ETF Trust

Best S&P 500 Index Funds

The S&P 500 is one of the most closely watched stock market indices in the world, and many funds base their investments on it. These five stand out.

Fidelity Zero Large Cap Index (FNILX)

Overview: The Mutual Fund Fidelity Zero Large Cap Index is part of the investment firm’s push for mutual funds without an expense ratio, hence the nickname Zero.

The fund doesn’t officially track the S&P 500 — it technically follows the Fidelity U.S. Large Cap Index — but the difference is academic.

The real difference is that investor-friendly Fidelity doesn’t have to pay licensing fees to use the S&P name, reducing costs for investors.

Expense ratio: 0%. This means that for every $10,000 invested, it will cost $0 per year.

Who is it good for? : Ideal for investors looking for a low-cost and broadly diversified index fund as a core investment in their portfolio.

Source of Supply: Funds can be purchased directly from fund houses or through most online brokers.

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Vanguard S&P 500 ETF (VOO)

Overview: As the name suggests, the Vanguard S&P 500 tracks the S&P 500 and is one of the largest funds in the market with hundreds of billions in funds.

The ETF traded in 2010 and is backed by Vanguard, one of the fund industry giants.

Expense ratio: 0.03%. This means that for every $10,000 invested, it will cost $3 per year.

Who is it good for? : Ideal for investors looking for a low-cost and broadly diversified index fund as a core investment in their portfolio.

Source of Supply: Funds can be purchased directly from fund houses or through most online brokers.

SPDR S&P 500 ETF Trust (SPY)

Overview: The SPDR S&P 500 ETF is the granddaddy of ETFs, having been around since 1993. He helped start the wave of ETF investing that is so popular today.

With hundreds of billions of dollars, the fund is one of the most popular ETFs. The fund is sponsored by State Street Global Advisors, another industry heavyweight, and tracks the S&P 500.

Expense ratio: 0.095%. This means that for every $10,000 invested, it will cost $9.50 per year.

Who is it good for? : Ideal for investors looking for a low-cost broadly diversified index fund as a core investment in their portfolio.

Source of Supply: Funds can be purchased directly from fund houses or through most online brokers.

iShares Core S&P 500 ETF (IVV)

Overview: The iShares Core S&P 500 ETF is a fund sponsored by BlackRock, one of the largest mutual fund companies. The iShares fund is one of the largest ETFs, tracking the S&P 500.

Launched in 2000, the fund is another long-term player that has been watching the index closely for a long time.

Expense ratio: 0.03%. This means that for every $10,000 invested, it will cost $3 per year.

Who is it good for? : Ideal for investors looking for a low-cost and broadly diversified index fund as a core investment in their portfolio.

Source of Supply: Funds can be purchased directly from fund houses or through most online brokers.

Schwab S&P 500 Index Fund (SWPX)

Overview: The Schwab S&P 500 Index Fund, with its tens of billions in assets, is on the smaller side of the heavyweights on this list, but that’s not really a concern for investors.

The mutual fund has a proven track record since 1997 and is sponsored by Charles Schwab, one of the most respected firms in the industry.

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Charles Schwab is known for its focus on investor-friendly products, as evidenced by the fund’s extremely low expense ratio.

Expense ratio: 0.02%. This means that for every $10,000 invested, it will cost $2 per year.

Who is it good for? : Ideal for investors looking for a low-cost and broadly diversified index fund as a core investment in their portfolio.

Source of Supply: Funds can be purchased directly from fund houses or through most online brokers.

Best Nasdaq Index Funds

The Nasdaq 100 is another stock market index, but because of its heavier weighting in tech stocks, it’s not as diversified as the S&P 500, the two funds that track the largest non-financial companies in the index.

Shelton Nasdaq 100 Direct (NASDX)

Overview: The Shelton Nasdaq-100 Index Direct ETF tracks the performance of the largest non-financial companies in the Nasdaq 100 Index, which is primarily composed of technology companies.

The mutual fund started trading in 2000 and has a solid track record over the past five and ten years.

Expense ratio: 0.5%. This means that for every $10,000 invested, it will cost $50 per year.

Who is it good for? : Suitable for investors looking for index funds that give them exposure to the tech sector and growth companies.

Source of Supply: Funds can be purchased directly from fund houses or through most online brokers.

Invesco QQQ Trust ETF (QQQ)

Overview: The Invesco QQQ Trust ETF is another index fund that tracks the performance of the largest non-financial companies in the Nasdaq 100.

The ETF was traded in 1999 and is managed by fund giant Invesco. Lipper said the fund was the best-performing large-cap fund in terms of total return over the 15 years to September 2021.

Expense ratio: 0.20%. This means that for every $10,000 invested, it will cost $20 per year.

Who is it good for? : Ideal for investors looking for relatively inexpensive index funds focused on technology and growth companies.

Source of Supply: Funds can be purchased directly from fund houses or through most online brokers.

More Top Index Funds for September 2022

While the S&P 500 and Nasdaq are the two most popular stock market indices, there are many other indices that represent different parts of the investing universe. These three index funds are also worth considering for your portfolio.

Vanguard Russell 2000 ETF (VTWO)

Overview: The Vanguard Russell 2000 ETF tracks the Russell 2000 Index, which consists of approximately 2,000 of the smallest publicly traded companies in the United States.

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The ETF was traded in 2010 and is a Vanguard fund, so it focuses on keeping costs low for investors.

Expense ratio: 0.10%. This means that for every $10,000 invested, it will cost $10 per year.

Who is it good for? : This fund is ideal for investors looking for a low-cost fund that gives them broad exposure to small-cap companies.

Source of Supply: Funds can be purchased directly from fund houses or through most online brokers.

Vanguard Total Stock Market ETF (VTI)

Overview: Vanguard also offers a fund that effectively covers all publicly traded stocks in the U.S. called the Vanguard Total Stock Market ETF. It consists of small, medium and large companies from various fields.

The fund has been around for a while since it started trading in 2001. With Vanguard as your sponsor, you know the cost will be low.

Expense ratio: 0.03%. This means that for every $10,000 invested, it will cost $3 per year.

Who is it good for? : Investors are looking for low-cost index funds that are broadly diversified by market capitalization.

Source of Supply: Funds can be purchased directly from fund houses or through most online brokers.

SPDR Dow Jones Industrial Average ETF Trust (DIA)

Overview: You don’t have many options when it comes to ETFs that track the Dow Jones Industrial Average, but State Street Global Advisors offers this fund that tracks a 30-stock large-cap index.

This fund is definitely one of the older ETFs, debuting in 1998 and has tens of billions of assets under management.

Expense ratio: 0.16%. This means that for every $10,000 invested, it will cost $16 per year.

Who is it good for? : Investors looking for low-cost investments in blue-chip companies or specific components of the Dow Jones Industrial Average.

Source of Supply: Funds can be purchased directly from fund houses or through most online brokers.

How to Invest in Index Funds in Three Easy Steps

Investing in index funds is very easy, but you should know what you’re investing in, not just buy random funds you don’t know.

1. Research and analyze index funds

Your first step is to figure out what you want to invest in. While S&P 500 index funds are the most popular index funds, they are also suitable for different industries, countries and even investment styles. So you need to think about what exactly you want to invest in and why it might offer an opportunity:

Location: Consider the geographic location of the investment. A broad index like the S&P 500 or Nasdaq 100 owns U.S. companies, while other index funds may focus on a narrower region (France) or an equally broad region (Asia Pacific).
Business: Which market sector does the index fund invest in? Will it invest in pharmaceutical companies making new drugs, or in tech companies? Some funds focus on certain industries and avoid others.
Market Opportunities: What Opportunities Do Index Funds Offer? Is the fund buying drug companies because they’re making the next blockbuster drug, or because they’re dividend-paying cash cows? Some funds invest in high-yielding stocks, while others favor high-growth stocks.

You should think carefully about what the fund invests in so you know what you actually own. At times, the labeling of index funds can be misleading. But you can look at the index’s holdings to get an accurate picture of the assets in the fund.

2. Decide which index fund you want to buy

Once you’ve found a fund you like, you can look at other factors that might make it a good addition to your portfolio. Fund fees are a huge factor, and they can cost you or cost you tens of thousands of dollars over time.

Fees: Compare the fees for each fund you’re considering. Sometimes a fund based on a similar index charges 20 times as much as another fund.
Taxation: Mutual funds tend to be less tax efficient than ETFs for some legal reasons. At the end of the year, many mutual funds pay taxable capital gains distributions, while ETFs do not.
Minimum Investment: Many mutual funds have a minimum investment amount for your first purchase, usually in the thousands of dollars. By contrast, many ETFs have no such rules, and your broker may even allow you to buy fractional shares for just a few dollars.

3. Buy your index fund

After you’ve decided which fund is right for your portfolio, it’s time for the easy part – actually buying the fund. You can buy directly from a mutual fund company or through a broker. But buying mutual funds through a broker is usually easier. When you buy an ETF, you need to contact your broker.

Dos and Don’ts of Investing in Index Funds

When looking at index funds, consider the following:

Long-term performance: It is important to track the long-term performance of an index fund (ideally at least 5 to 10 years of performance) to understand what your potential future returns may be. Each fund may track or outperform another index, and some indices will outperform others over time. Long-term performance is the best measure of future expectations, but it’s not a guarantee.
Expense Ratio: The expense ratio shows how much you pay each year for fund performance. For a fund that tracks the same index, such as the B.S&P 500, it doesn’t make sense to pay more than you have to. Other index funds may track indices with better long-term performance, which may justify higher expense ratios.

Transaction costs: When you buy a mutual fund, some brokers offer very attractive prices, even higher than the same mutual fund company itself. If you choose to trade ETFs, you can now trade with almost every major online broker without commissions. Also, when buying mutual funds, be aware of sales fees or commissions, which can easily lose 1% or 2% of your money before investing. These can be easily avoided by careful selection of funds, such as B. Vanguard and many others.
Fund Selection: However, not all brokers offer all mutual funds. Therefore, you need to see if your broker offers a specific fund series. In contrast, ETFs are generally available from all brokers because they are all traded on one exchange.
Convenience: Choosing the mutual funds your broker offers on their platform is much easier than opening a new brokerage account. However, if you choose ETFs instead of mutual funds, you may be able to circumvent this problem as well.

Index Fund Risks

Investing money in market-based investments like stocks or bonds means investors could lose everything if the company or government that issued the securities gets into serious trouble. However, the situation is a little different with index funds, as they are usually very diversified.

An index fund typically owns at least dozens of securities, and possibly hundreds, meaning it is highly diversified. For example, in a stock index fund, every stock must be zeroed, and the index fund, and therefore the investor, loses everything. So while everything could theoretically be lost, that doesn’t happen with standard mutual funds.

However, depending on what they invest in, index funds can underperform and lose money for years. But the chances of index funds losing everything are very slim.

Are there any fees for index funds?

Index funds may have different types of fees, depending on the type of index fund:

Mutual Funds: Index funds initiated by mutual fund companies may charge two types of fees: a sales fee and an expense ratio.
Selling charges are commissions used only on fund purchases and may be incurred at the time of purchase or sale, or over time. Investors can often avoid these issues by contacting an investor-friendly fund house such as Vanguard, Schwab or Fidelity.
An expense ratio is an ongoing fee paid to the fund company based on your assets in the fund. Typically, these are debited from the account on a daily basis and withdrawn from the account seamlessly.
ETFs: Index funds launched by ETF companies (many of which also operate mutual funds) charge only one fee, the expense ratio. It works the same way as a mutual fund, with a seamless withdrawal of a small percentage each day you hold the fund.

What is considered a good expense ratio?

The average expense ratio for mutual funds and ETFs is one of the cheapest, and that number also depends on whether they invest in bonds or stocks. In 2021, the average equity index fund is calculated to be 0.06% (weighted by assets), or $6 per $10,000 invested. The average charge for a stock index ETF is 0.16% (asset-weighted), or $16 for every $10,000 invested.

Index funds tend to be much cheaper than regular funds. Compare the numbers above with the average stock fund that charges 0.47% (on an asset-weighted basis) or the average stock ETF that charges 0.16%. While ETF expense ratios are the same in every case, retail funds typically have higher fees. Many mutual funds are not index funds and charge higher fees to cover the added fees of their investment management teams.

Is now a good time to buy index funds?

If you’re buying a stock index fund, or any broadly diversified stock fund like the Nasdaq 100, this could be a good time to buy if you’re willing to hold for the long term. That’s because markets tend to rise over time as the economy grows and corporate earnings rise. Time is your best friend in this regard because it allows you to compound your money and turn your money into money. However, a diversified index fund (such as one that focuses on a certain industry) can underperform for many years.

That’s one reason why a patient approach is crucial for investors to weather short-term volatility. Experts recommend adding funds to the market on a regular basis to take advantage of dollar average costs and reduce risk. Strong investment discipline can help you make money in the market over time. Investors should avoid market timing; h. Jump in and out of the market to make profits and avoid losses.

Bottom line

These are some of the best index funds that give investors the opportunity to own a broad range of stocks at low cost while enjoying the benefits of diversification and reduced risk. Given these benefits, it’s no surprise that these are some of the largest funds out there.

So learn more:

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