Roughly 90% of actively managed funds fail to beat the S&P 500 over 20 years, according to S&P Dow Jones Indices. That stat alone is why so many new investors search for the best index funds instead of trying to pick winning stocks.
Index funds let you own a slice of hundreds of companies at once. They charge low fees and require very little upkeep. For someone building wealth slowly, they can be one of the simplest tools available.
This guide breaks down four top index fund picks, what makes them stand out, and how to start buying shares. If you are also working on your credit score, a credit builder card can run alongside your investing plan.
Our Top Picks
These four index funds rank highly for beginners because of low expense ratios, strong tracking, and easy access. You can purchase any of them through Robinhood or Public with no commission fees. For a deeper look at each platform, see our Robinhood review and Public.com review.
- VOO (Vanguard S&P 500 ETF): Tracks the S&P 500 with an expense ratio of 0.03%. A favorite for hands-off investors.
- VTI (Vanguard Total Stock Market ETF): Covers nearly the entire U.S. stock market in one fund. Expense ratio sits at 0.03%.
- SWPPX (Schwab S&P 500 Index Fund): A mutual fund version of an S&P 500 tracker with a 0.02% expense ratio and no minimum.
- FXAIX (Fidelity 500 Index Fund): Another S&P 500 mutual fund with a 0.015% expense ratio. Popular inside Fidelity retirement accounts.
All four hold the same general type of companies. The choice often comes down to which brokerage account you already use. If you are still deciding whether to put cash into the market at all, our guide on saving vs investing can help frame the trade-offs.
Robinhood
Robinhood
Robinhood is a trading platform that brings stocks, ETFs, options, futures, prediction markets, crypto, and retirement accounts together in one app.
Standout feature
One platform for stocks, ETFs, options, futures, prediction markets, and crypto
Fees
$0 commission on stocks, ETFs, and options.
Pros
Zero-commission trading on stocks, ETFs, and options
Cons
Best perks (high APY, lower margin rates) require Gold subscription ($5/month)
Public
Public
Investing for those who take it seriously. Invest in stocks, bonds, options, crypto & more.
Standout feature
A 5%+ yield Bond Account paired with 3.3% APY on cash — Public is one of the only consumer apps where idle and conservative money is treated as seriously as the equity portfolio.
Fees
Free
Pros
• Invest in stocks, bonds, crypto & more• Earn 3.3% APY* on your cash with no fees• 1% match when you transfer your portfolio• Lock in a 5%+ yield with a Bond Account
Cons
Customer support is in-app and email only, no phone
What Makes the Best Index Funds Stand Out
Not every index fund is built the same. A few features tend to separate strong picks from mediocre ones.
Low Expense Ratios
The expense ratio is the yearly fee a fund charges. Funds like VOO and FXAIX charge less than 0.05%, which means you keep more of your returns. Even a 1% fee can shave tens of thousands off your portfolio over decades.
Broad Diversification
A good index fund holds many companies across different sectors. VTI, for example, owns more than 3,500 U.S. stocks. That spread can help cushion losses when one industry stumbles.
Strong Tracking Accuracy
A quality index fund mirrors its benchmark closely. Small gaps, called tracking error, can add up. The funds listed here all have low tracking error histories.
Easy Access
The best index funds are available across most brokerages with no commission. Robinhood and Public both offer fractional shares, which means you can start with as little as $1. Younger investors browsing the best investing apps for college students will find these names near the top of most lists.
How to Buy the Best Index Funds
Getting started takes only a few steps. Most people can finish the process in under an hour.
Step 1: Open a Brokerage Account
Pick a platform that fits your style. Robinhood offers a clean mobile experience, while Public adds social features and educational content. Both let you buy ETFs like VOO and VTI without fees. If you are weighing a taxable account against an IRA, see our breakdown of brokerage account vs retirement account.
Step 2: Fund the Account
Link a bank account and transfer money in. Some platforms allow instant deposits up to a small limit, so you can buy right away.
Step 3: Place Your Order
Search for the ticker, such as VOO, and enter the dollar amount or share count you want. Market orders fill at the current price.
Step 4: Set Up Recurring Buys
Many brokerages let you schedule automatic purchases. This habit, often called dollar-cost averaging, can smooth out the bumps of market timing.
ETFs vs Mutual Funds
VOO and VTI are ETFs. SWPPX and FXAIX are mutual funds. Both can hold the same kinds of stocks, but they trade differently.
ETFs trade throughout the day like stocks. Mutual funds settle once per day at the closing price. ETFs often have lower minimums, which makes them friendlier for small starting balances.
Mutual funds may still be the right pick inside a 401(k) or IRA. If you are using a workplace plan, check which funds your provider offers. Investors using a Robinhood Roth IRA can hold ETFs like VOO with the same tax advantages as a traditional retirement account.
Common Mistakes to Avoid
Beginner investors sometimes hurt their returns with avoidable habits. Watching for these can help.
- Chasing past performance: Last year's winner may not lead next year.
- Selling during dips: Markets recover over time, and panic selling can lock in losses.
- Holding too many overlapping funds: Owning VOO and VTI together creates a lot of duplication.
- Ignoring fees in 401(k) plans: Some employer-sponsored funds charge much more than retail ETFs.
A simple portfolio of one or two broad index funds can outperform a complicated mix for many beginners.
Where Credit Building Fits In
Investing and credit building work better together. A strong credit score may help you qualify for better mortgage rates, which frees up cash for investing. Firstcard offers a secured credit card designed to help users build credit while spending normally.
If you want to track score changes month over month, free credit monitoring can watch your progress alongside your investing growth.
Frequently Asked Questions
What is the best index fund for a complete beginner?
VOO and FXAIX are popular starting points because they track the S&P 500 with very low fees. Both give exposure to 500 of the largest U.S. companies in a single purchase. The right pick may depend on which brokerage you use.
How much money do I need to start investing in index funds?
Many brokerages let you start with $1 through fractional shares. Robinhood and Public both support this feature. Building a habit of regular small contributions can matter more than the starting amount.
Are index funds safe?
Index funds carry market risk, so values can fall during downturns. They are typically considered lower risk than picking individual stocks because they spread money across many companies. No investment is risk free.
Should I pick an ETF or a mutual fund version?
ETFs like VOO trade throughout the day and often have lower minimums. Mutual funds like FXAIX may be easier inside retirement accounts. Both can deliver similar long-term returns when fees are comparable.
