Index Funds & ETFs
Passive investing for long-term wealth building. The Boglehead approach.
Index funds and ETFs track a market index like the S&P 500. They offer instant diversification and low fees — the best choice for most investors.
Popular Index Funds
Why Index Funds?
- Low fees — Often under 0.10% annually
- Diversification — Own hundreds of companies
- Consistent returns — Beat most active managers
- Set and forget — Perfect for passive investors
⚠️ Risk Level
Index funds carry market risk but are far less volatile than individual stocks. Historical average return: 7-10% annually.
Risk Level: Low-Medium
How vs Other Investments
Funds Compares| Feature | Mutual Funds | ETFs | Stocks | Bonds |
|---|---|---|---|---|
| Trading | Daily (NAV) | Live | Live | Live/OTC |
| Expense ratio | 0.5-1.5% | 0.03-0.5% | — | — |
| Min investment | $500+ | $1 | $1 | $100 |
| Management | Active | Most passive | Self | Self |
Historical Performance
Actively managed mutual funds have historically returned about 8-10% per year before fees, but over 90% underperform their benchmark index after fees over 10+ years. Expense ratios of 0.5-1.5% significantly drag long-term returns.
Frequently Asked Questions
Mutual fund or ETF?
ETFs usually win on cost and tax efficiency. Mutual funds can offer automatic investing and active management, but fees are higher.
What is an expense ratio?
It is the annual fee the fund charges, expressed as a percentage of assets. Even 1% per year compounds into a large drag over decades.
Are mutual funds safe?
They carry market risk like stocks but are diversified. Principal is not guaranteed and funds can lose value.
⚠️ Disclaimer
Figures above are historical/illustrative averages, not forecasts. Investment involves risk, including loss of principal. This page is educational and not financial advice.