Best Index Funds | morning star | Jobs Vox


Index funds are passive investments. You track an index with the goal of replicating that index’s performance, expenses. Active funds are managed by managers who select specific securities to outperform an index.

But some index funds are better than others. The best index funds do a good job of tracking their indexes closely, keeping expenses low, and following indexes based on reasonable rules.

Why are index funds such a popular investment option?

The first index fund, the Vanguard 500, debuted in 1976. Since then, index funds have exploded in popularity: Today, investors are pouring money into U.S. stock index funds while pulling money away from their actively managed counterparts. And index funds that focus on global stocks and bonds are also becoming more popular.

why? Many would argue that buying and holding a broader market (whatever that market is) will do better than trying to hit the same market. Indeed, Morningstar research has shown that index funds have outperformed active funds over time in many investment categories.

Advantages of investing in index funds

Whatever the value of historical performance, investing in index funds has many advantages.

  • Index funds often cost less than similarly-managed actively managed funds.
  • Index funds perform according to the market they track; So, there are not many surprises in the performance.
  • Index funds do not face the so-called key man risk, which means that manager changes are not a big deal, as there is no active security selection.
  • Index funds are often more tax-friendly than similar active funds.

The best index funds to invest in

A good place to start your search for top-rated exchange-traded funds and mutual funds is with the Morningstar Analyst Rating. Our top-rated Gold-earning funds are those that we think can outperform over an entire market cycle.

Here’s a list of the best index mutual funds and ETFs, broken down into the three main asset classes represented in many investors’ portfolios: U.S. stocks, international stocks, and bonds. We’re including a list of what we call “specialty” index funds, which feature top-rated funds from investment categories that are common in most investors’ portfolios.

The best US stock index funds

These mutual funds and ETFs are all in the same broad U.S. stock index categories and will receive top gold analyst ratings starting in November 2022.

  1. DFA US large company DFUSX
  2. Fidelity 500 Index FXAIX
  3. Fidelity Total Market Index FSKAX
  4. iShares Core S&P 500 ETF IV
  5. iShares Core S&P Total US Stock Market ETF ITOT
  6. iShares S&P 500 Index WFSPX
  7. Schwab Total Stock Market Index SWTSX
  8. Schwab US Broad Market ETF SCHB
  9. Schwab US Large-Cap ETF SCHX
  10. Schwab S&P 500 Index SWPPX
  11. SPDR Portfolio S&P 1500 Composite Stock Market ETF SPTM
  12. SPDR Portfolio S&P 500 ETF SPGL
  13. Vanguard S&P 500 ETF/Vanguard 500 Index VOO VFIAX
  14. Vanguard Dividend Appreciation ETF/index VIG VDADX
  15. Vanguard Extended Market ETF/Index VXF VEXAX
  16. Vanguard Growth ETF/Index VUG VIGAX
  17. Vanguard Large-Cap ETF/Index VV VLCAX
  18. Vanguard Mid Cap ETF/Index VO VIMAX
  19. Vanguard Mid-Cap Growth ETF/Index VOT VMGMX
  20. Vanguard Mid-Cap Value ETF/Index VOE VMVAX
  21. Vanguard Small-Cap Growth ETF/Index VBK VSGAX
  22. Vanguard Small-Cap Value ETF/Index VBR VSIAX
  23. Vanguard Total Stock Market ETF/Index VTI VITSX
  24. Vanguard Value ETF/Index VTV VVIAX

Although this is a list of the best broad-based index funds that invest in US stocks, there are some differences here. Many of the funds in the group track the S&P 500 and therefore provide access to the largest stocks representing 80% of the US stock market. Other index funds on the list track very broad market indexes that include many stocks, some of which are small-cap names. Meanwhile, other funds on the list focus on tracking indexes based on market capitalization (mid- or small-cap stocks) or investment style (growth stocks or value stocks).

To fully understand a fund’s strategy, be sure to read the Morningstar Fund Analyst Report.

The best global-stock index funds

These mutual funds and ETFs are all located in one of the broadest global stock categories and will receive our top gold analyst rating from November 2022.

  1. iShares Core MSCI Total International Stock ETF IXUS
  3. Vanguard FTSE All-World Former US ETF/Index VEU VFWAX
  4. Vanguard Total International Stock ETF/Index VXUS VTIAX
  5. Vanguard Total World Stock ETF/index VT VTWAX

Here we have another great set of broad-based index funds—in this case focused on global stocks—with some variety. Some funds track international indexes that include U.S. stocks. Others track international indexes that do not include U.S. stocks. Consult the investment’s Morning Star Fund analyst report for clarification.

The best bond index funds

These mutual funds and ETFs all feed into one of the broader bond categories and will receive top gold analyst ratings from November 2022.

  1. Fidelity US Bond Index FXNAX
  2. iShares Core US Aggregate Bond ETF AGG
  3. iShares Core Total USD Bond Market ETF IUSB
  4. SPDR Portfolio Aggregate Bond ETF SPAB
  5. Vanguard Long Term Bond ETF/Index BLV VBLLX
  6. Vanguard Long-Term Corporate Bond ETF/index VCLT VLTCX
  7. Vanguard Short Term Corporate Bond ETF/Index VCSH VSTBX
  8. Vanguard Short Term Treasury ETF/Index VGSH VSBSX
  9. Vanguard Tax Free Bond ETF/Index VTEB VTEAX
  10. Vanguard Total Bond Market ETF/Index BND VBTIX

Many of the best broad-based index funds on this list are in medium-term bond categories. Therefore, assuming that the fund’s goals are six or more years away, they make good choices for holding the bond portion of an investor’s portfolio. Those saving for a short-term goal in the next three to five years may consider short-term bond funds instead. Long-term investors may consider long-term bond funds – but they should be prepared for the increased volatility that comes with investing in long-term bonds.

The best special index funds

These mutual funds and ETFs are grounded in one of the specific stock or bond categories and will receive our top gold analyst rating as of November 2022.

  1. Schwab US TIPS ETF SCHP
  2. Vanguard FTSE Europe ETF/Vanguard European Stock Index VGK VEUSX
  3. Vanguard Real Estate ETF/index VNQ VGSLX
  4. Vanguard Short-Term Inflation-Protected Securities ETF/Index VTIP VTAPX

The top-rated mutual funds and ETFs on this list are good choices for investors looking to fill multiple roles in their portfolios. For example, retirees often hold mutual funds to cushion the impact of inflation on their portfolios. Two funds in this list are designed to do this.

How to find the best index funds

Of course, focusing on Morningstar Gold-rated funds can be too limiting for some investors. Those looking to consider funds beyond the top ratings can review U.S. stock index funds and ETFs and bond index funds and ETFs that earn bronze, silver, and gold ratings.

Investors can also evaluate all index mutual funds or all index ETFs. These lists include funds that do not currently have analyst ratings.

Should You Invest in an Index Mutual Fund or ETF?

Investors can access passive strategies through two different investment products: mutual funds or exchange-traded funds.

One product is not better than another; Choosing the right wrap depends on personal preferences. Investors looking for trading flexibility or who have a few dollars to invest may choose ETFs, while those seeking index funds through company-sponsored retirement plans are better off buying mutual funds.

To learn more about the differences between mutual funds and ETFs, see “Traditional Index Fund vs. Read ETF Cage Match”.


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