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Index funds are investment vehicles designed to mirror the performance of a specific market index or the broad stock market. Rather than attempting to beat a market index, these funds aim to replicate its returns by holding the same or similar securities.
While they offer simplicity, low costs, and instant diversification, index funds also involve specific risks and nuances that investors should understand. Below, we look at 10 top index funds this month, explain how index funds work, and explore factors that may influence their value and overall performance.
Key Points
• Index funds are investment vehicles that aim to replicate the returns of a specific market index, such as the S&P 500® or Russell 2000®.
• The primary driver of an index fund’s price is the performance of its underlying market index, which may be influenced by market trends and economic factors, such as interest rates and inflation.
• Key potential advantages include low fees due to passive management, instant diversification across many securities, and historically reliable long-term performance across major indexes, though past performance doesn’t guarantee future results.
• Possible risks may include more limited upside since index funds aim to match — not beat — an index’s performance, broad exposure to market downturns, and lack of flexibility.
• Common pitfalls of index fund investing include attempting to time the market, chasing short-term returns, over-diversifying, and panic-selling during market downturns.
10 Top Index Funds
Following are 10 index funds that have at least $1 billion in assets under management (AUM), ranked by market performance as of May 2026. These index funds track indexes such as the broader S&P 500, indexes with small-, mid-, and large-cap stocks, and established international stocks.
Keep in mind that this list of funds changes month-to-month, and past performance is not indicative of future results. It’s important to carefully research any index fund you may be interested in to determine if it aligns with your time horizon, risk tolerance, and overall goals.
| Index Funds | Ticker | Assets Under Management | Expense Ratio | Dividend Yield | 1-Month Return | 1-Year Return |
|---|---|---|---|---|---|---|
| Vanguard FTSE Developed Markets ETF | VEA | $223.3 billion | 0.03% | 0.63% | -0.5% | 29.5% |
| Vanguard Growth ETF | VUG | $224.7 billion | 0.03% | 0.37% | 4.9% | 25.0% |
| Vanguard S&P 500 ETF | VOO | $960.6 billion | 0.03% | 1.11% | 3.4% | 24.7% |
| iShares Core S&P 500 ETF | IVV | $824.1 billion | 0.03% | 0.97% | 3.4% | 24.7% |
| State Street SPDR Portfolio S&P 500 ETF | SPYM | $142.9 billion | 0.02% | 0.90% | 3.4% | 24.7% |
| Schwab International Equity ETF | SCHF | $63.7 billion | 0.03% | 5.09% | -0.4% | 29.2% |
| Vanguard Total Stock Market ETF | VTI | $640.8 billion | 0.03% | 1.11% | 2.7% | 24.2% |
| State Street SPDR Portfolio Developed World ex-US ETF | SPDW | $39.3 billion | 0.03% | 3.23% | -0.5% | 29.2% |
| iShares Core S&P Total U.S. Stock Market ETF | ITOT | $90.8 billion | 0.03% | 0.82% | 2.7% | 24.2% |
| Vanguard Large-Cap ETF | VV | $51.9 billion | 0.03% | 1.02% | 3.5% | 24.2% |
Source: Data from SoFi and Bloomberg, as of May 19, 2026. Universe of funds includes U.S.-based, passively managed funds with at least $1B in assets under management (AUM), an expense ratio of 0.2% or lower, a positive price-to-earnings (P/E) ratio, and no leverage. Funds ranked according to their AUM, expense ratio, and a blend of short-term and long-term performance.
Vanguard FTSE Developed Markets ETF (VEA)
VEA is an index fund managed by Vanguard Capital Management that attempts to track the performance of the FTSE Developed All Cap ex US Index. It offers investors exposure to a broad group of stocks of various sizes in Canada, Europe, and the Pacific region.
Vanguard Growth ETF (VUG)
Another index fund managed by Vanguard, Vanguard Growth ETF, or VUG, seeks to track the CRSP U.S. Large Cap Growth Index, and invests in domestic stocks. It has an expense ratio of 0.03%, and in April 2026, completed a 6:1 share split.
Vanguard S&P 500 ETF (VOO)
VOO is a very popular index fund, managed by Vanguard, that is designed to track the S&P 500 index. It’s a diversified fund that provides exposure to the broader market, designed for long-term growth.
iShares Core S&P 500 ETF (IVV)
IVV is another popular, broad index fund similar to VOO, and it seeks to track the performance of the S&P 500. The fund was conceived in May of 2000, is managed by iShares, and has an expense ratio of 0.03%.
State Street SPDR Portfolio S&P 500 ETF (SPYM)
SPYM, previously called SPLG, is yet another fund that tries to mimic the performance of the S&P 500 index. It represents roughly 80% of the market, according to State Street, and has an expense ratio of 0.02%.
Schwab International Equity ETF (SCHF)
Managed by Schwab, the Schwab International Equity ETF, which trades under the “SCHF” ticker, tracks the FTSE Developed ex U.S. Index, which is a collection of investments focused outside of the United States. The fund was created in 2009, and has an expense ratio of 0.03%.
Vanguard Total Stock Market ETF (VTI)
Another Vanguard fund, the Vanguard Total Stock Market ETF, or VTI, attempts to track the performance of the CRSP U.S. Total Market Index, which includes a blend of large-, mid-, and small-cap U.S. equities. It was created in 2001, and has an expense ratio of 0.03%.
State Street SPDR Portfolio Developed World ex-US ETF (SPDW)
Another State Street fund, SPDW, tries to mimic the performance of the S&P Developed Ex-U.S. BMI Index, which offers investors broad exposure to developed international stocks. It was created in 2007, and has an expense ratio of 0.03%.
iShares Core S&P Total U.S. Stock Market ETF (ITOT)
ITOT is a total U.S. stock market fund that tracks an index composed of U.S. stocks with varying market capitalizations, according to its management company, iShares (by Blackrock). The fund, basically, offers investors exposure to a large swath of U.S. stocks, and has an expense ratio of 0.03%. It was created in 2004.
Vanguard Large-Cap ETF (VV)
Vanguard’s VV fund, which is an ETF that tries to track the CRSP U.S. Large Cap Index, gives investors exposure to a broad group of large U.S. stocks. It was created in 2004, and has an expense ratio of 0.03%.
What Are Index Funds?
Index funds are a type of mutual fund or an exchange-traded fund (ETF) designed to track the performance of a specific market index, such as the S&P 500, the Dow Jones Industrial Average, or the Russell 2000. By holding the same or similar assets as the index they track, these funds aim to match the market’s overall performance rather than beat it.
Index funds can track a variety of asset classes, ranging from global stocks and bonds to specific sectors like technology or health care. Purchasing a single share offers immediate diversification across hundreds or sometimes thousands of companies, which may help shield investors from the volatility of individual company failures.
Because they don’t require expensive research teams or frequent trading, passively managed index funds generally have significantly lower operating costs than actively managed funds. This combination of low overhead and broad market exposure makes them popular with both beginning and experienced investors.
What Impacts the Price of Index Funds?
The primary driver of the price of an index fund is the performance of its associated index. If the companies within the index increase in value, the index fund’s price rises accordingly. If the market declines, typically so does the fund. As a result, a number of factors — including interest rates, inflation, and global economic trends — influence index performance, and therefore index fund prices.
Many index funds also pay dividends based on the earnings of the companies they hold. These payouts may impact total returns and occasionally affect the fund’s price after distribution.
While not directly affecting daily price movements, expense ratios (annual fees) reduce overall returns over time. For example, if two index funds tracked the same benchmark, and held identical assets in the same proportion, the fund with the lower expense ratio would, mathematically, outperform the more expensive one.
How to Evaluate Index Funds
When evaluating an index fund, it’s important to look beyond just the share price. A higher or lower price doesn’t determine where a fund is “better” — what matters is how efficiently the fund tracks its index, its cost, and its overall performance. Here are some factors to consider when evaluating an index fund:
• Index composition and strategy: Not all indexes are the same. Some track large-cap stocks, while others focus on small-cap, international, or sector-specific investments. It’s important to make sure the index aligns with your investment goals and risk tolerance.
• Expense ratio: An index fund’s expense ratio represents the annual fee charged by the fund as a percentage of your investment. Lower expense ratios means you keep more of your returns over time, making cost efficiency a key advantage of many index funds.
• Transaction fees: Investing in mutual funds or ETFs often involves transaction fees or commissions each time you buy or sell shares. While these individual costs might seem minor, they can become expensive for investors who trade frequently or make monthly contributions.
• Tracking error: Tracking error measures how closely the fund follows its index. A well-managed index fund should have minimal deviation from the index it tracks. Consistent underperformance compared to the index may indicate inefficiencies.
• Total return: Instead of focusing only on price changes, it’s wise to evaluate an index fund’s total return, which includes both price appreciation and dividends. This gives a more accurate picture of the fund’s overall performance.
Pros and Cons of Investing in Index Funds
Before investing in index funds, it’s important to understand both their advantages and limitations. Here are some potential pros and cons to consider:
Pros
• Low costs: Index funds are passively managed, which means they have lower fees compared to actively managed funds. This cost advantage can compound over time.
• Diversification: By investing in an index fund, you gain exposure to dozens, hundreds, or even thousands of securities, reducing individual company risk.
• Ease of use: Index funds are beginner-friendly. You don’t need deep expertise to get started.
• Historically reliable long-term returns: Historically, broad market indexes have trended upward over time, making index funds a popular long-term investment. That said, past performance does not guarantee future results.
Cons
• No outperformance: Index funds aim to match the market, not beat it. If you’re seeking an opportunity to earn above-average returns, they may not satisfy that goal.
• Market risk: When the market declines, index funds decline as well. There’s no active manager to step in and make adjustments that may shield investors against downturns.
• Less control: You can’t pick and choose which companies are included — you automatically gain exposure to everything in the index.
• Exposure to weak performers: Indexes include both strong and weak companies, which can drag on performance.
How to Invest in Index Funds
Getting started with index funds is relatively straightforward, even for beginners. By following a clear step-by-step approach, you can quickly build a diversified portfolio that aligns with your financial goals.
Choose a Platform
The first step is selecting where you’ll invest. This typically means opening an account with a brokerage firm. When comparing online investing platforms, consider factors such as account fees, trading commissions, available fund options, and ease of use. Once you’ve selected a brokerage, open and fund your account.
Select an Index Fund
Next, choose an index fund that matches your investment goals. Decide what type of market exposure you want — such as a broad U.S. stock market fund, an international fund, or a bond index fund. As you compare options, pay close attention to the expense ratio, tracking performance, and the index the fund follows. A well-chosen fund should align with your long-term strategy and provide the level of diversification you’re looking for.
Place an Order
Once you’ve selected a fund, you can place your order through your brokerage account. If you’re investing in an ETF, you’ll buy shares during market hours at the current market price or set a limit order for a specific price. If you’re investing in a mutual fund, your order will be executed at the end of the trading day at the funds’ net asset value (NAV). Decide how much you want to invest and consider setting up a regular contribution strategy such as dollar cost averaging.
Things to Avoid When Investing in Index Funds
Index funds generally offer a long-term investing option that tends to be lower risk than individual stock investments, but they aren’t risk-free. Here are some common mistakes investors may make when buying index funds:
• Timing the market: Attempting to buy low and sell high instead of maintaining a “buy-and-hold” strategy often leads to lower returns or losses, as it is difficult to predict market dips and spikes.
• Chasing short-term performance: Just because a fund performed well recently doesn’t mean it will continue to do so. Focus on long-term consistency instead.
• Over-diversifying: Owning too many overlapping index funds may dilute returns and complicate your portfolio without adding real diversification.
• Ignoring expense ratios: While index funds are generally low-cost, not checking fees can lead to buying funds with higher expense ratios, which may diminish your potential returns over time.
• Neglecting asset allocation: While index funds offer diversification, investors generally don’t put all of their savings into one index fund. True diversification requires balancing your holdings across different asset classes like stocks, bonds, and cash.
• Panic selling during market drops: Market volatility is normal. Selling during downturns locks in losses and can derail potential long-term growth.
The Takeaway
Index funds are passive, broad investment vehicles designed to track certain market segments and match their performance. They’re “low-lift” investments that may fit in well with a long-term investment strategy. However, they do carry risks; investors are responsible for expense ratios and the funds may experience relative underperformance compared to funds designed to beat the market. Many index funds are also vulnerable to broader market declines.
As always, it’s a good idea to consider how index fund investing aligns with your broader financial goals. If you need personalized guidance, consulting with a financial professional can help you determine the best fit for your portfolio.
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FAQ
How do S&P 500 and total market index funds differ?
The S&P 500 index fund tracks the performance of 500-plus of the largest, most established U.S. companies. A total market index fund, in contrast, aims to track the entire U.S. stock market, including large-cap, mid-cap, and small-cap stocks. This makes the total market fund a broader, more diversified investment, though both offer significant exposure to the overall equity market.
Are index funds safe?
Index funds are generally considered less risky than investing in individual stocks because they offer broad diversification across many companies, which mitigates the impact of any single company’s poor performance. However, they are not risk-free. Index funds are still subject to market risk — when the overall stock market declines, the value of the index fund may also fall. The safety of an index fund depends on the stability of the market it tracks and your investment time horizon. They are best suited for long-term strategies.
What are the costs I should look for when investing in index funds?
The primary costs associated with index funds are the expense ratio and transaction fees. The expense ratio is the annual fee charged by the fund, expressed as a percentage of your investment, which reduces your potential returns over time. Lower is better. Transaction fees, or commissions, may be charged by your brokerage each time you buy or sell shares, though many platforms now offer commission-free trading for certain ETFs and mutual funds.
What are typical returns for index funds?
Index funds aim to match the performance of the index they track. Returns vary, but for funds tracking the S&P 500, historical annual returns have averaged around 10%, not accounting for inflation. It’s important to remember that past performance is not a guarantee of future results, and actual returns are also reduced by the fund’s expense ratio. Index funds are generally best suited for investors with a long-term time horizon.
Are index ETFs the same as index mutual funds?
Index exchange-traded funds (EFTs) and index mutual funds both track a market index, but they trade differently. An index ETF trades like a stock on an exchange throughout the day, meaning its price fluctuates and is bought/sold at the current market price. An index mutual fund is purchased or sold directly from the fund company, and all orders are executed once per day after the market closes at the fund’s net asset value (NAV). Mutual funds typically provide more shareholder services, while ETFs tend to have lower costs and better tax efficiency.
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