Yahoo Finanzen Great Index Funds for a Dirt-Cheap Portfolio
Think of the last time you picked mutual funds for your portfolio, either in your 401(k) or a taxable brokerage account. The sheer number of choices probably made your head spin, and you may have simply ended your misery by selecting funds with the highest ratings from Morningstar or another service.
But there's one often-overlooked factor that can have a huge impact on your money: expenses. That's where index mutual funds shine, offering exceptionally low costs and a convenient way to diversify across asset classes, market capitalizations and global regions.
Vanguard illustrates the damaging effect of high fees with this example: Say a person puts $10,000 into an investment with a 5 percent average annual return and a 1.25 percent annual expense ratio. After one year, that investor will hand over 25.9 percent of that return in fees. But if the expense ratio dropped to 0.20 percent, the return lost to fees is only 4.2 percent. Put another way, the investor keeps 95.8 percent of the return, before taxes.
But how do you pick the right index mutual funds? Using Morningstar's screening tools, U.S. News identified a number of low-cost index mutual funds in several categories that can be used as the core building blocks of most portfolios.
Our screening criteria included low expenses and excluded funds with a sales load or commission. It's always worth looking at fees first, because even in this era of inexpensive index mutual funds and exchange-traded funds, some brokers continue to sell funds with a hefty load and high annual expenses. (That's why, even though we've excluded high-cost funds, it's always worth asking your broker, advisor or fund company to explain all applicable fees.)
We also excluded more specialized funds that are unlikely to be part of a traditionally balanced portfolio. Enhanced indexes, or those engineered to deviate from a common benchmark, as well as country- or region-specific funds were excluded.
Instead, we screened for funds tracking broad indexes that would fit into many common portfolios. Still, within our categories, it's worth noting some variation among funds. For example, plain-vanilla Standard & Poor's 500 index funds are essentially the same, with the main differences being expenses. However, it's not so easy to compare apples to apples in other asset classes.
For example, in the mid-cap blend category, the Vantagepoint Mid/Small Company Index Fund tracks the Russell 2500 index, which includes the 2,500 smallest stocks in the Russell 3000 index. But in the same category, the Fidelity Spartan Mid Cap Index Fund tracks the performance of the Russell Midcap Index, made up of the 800 smallest companies in the Russell 1000 index. In different situations, either fund could be a valid choice to access small stocks, but they differ in terms of performance and volatility. The same goes for mid-cap funds: Funds may appear in the same Morningstar category, but one may include a greater number of smaller stocks, which historically have a higher expected return.
Also, while funds in each category are listed in order of lowest expenses to highest, this list doesn't attempt to pick a "best" fund in each category. The best fund for you may be wrong for your next-door neighbor and vice versa, depending on your investing objectives and risk tolerances.
Consider the funds below some of the most cost-effective options to include in a well-diversified portfolio. Although many ETFs can also give you low-cost index exposure, employer-sponsored 401(k) plans typically offer few ETF choices. That leaves you to choose among mutual funds in your retirement plan.
Historically, it's been tough to find index funds in 401(k) plans. That's because 401(k) vendors such as brokers, mutual fund firms or insurance companies choose the available options, and actively managed funds carry higher fees that go back to the managers, along with fees mutual fund companies often pay for "shelf space" to be included in such plans.
However, investors in some plans are starting to see more passively managed funds, says Will Byron, regional managing director at NFP, a Charlotte, North Carolina-based advisor. Consumer demand is driving the inclusion of more index funds, Byron says. "Passive investors have been asking for it, and plan sponsors have been adding additional indexes outside the S&P fund to help meet that demand. We have definitely seen expanded use of index funds in every category and have been a big proponent of adding them," he says.
Below are tables containing the index funds in the U.S. News screens. Not every category contained index funds that made it through our screening process. Rather than loosen screens to include funds with higher fees or greater turnover (which increases trading costs), we limited our results to the categories below.
S&P 500: Invests in the 500 largest U.S. companies.
Name | Ticker | Stock Industry/Fund Category | % Total Return 3 Year | % Total Return 5 Year | % Expense Ratio |
|---|---|---|---|---|---|
Dreyfus Basic S&P 500 Stock Index | DSPIX | Large Blend | 15.6 | 14.1 | 0.2 |
Fidelity Spartan® 500 Index Inv | FUSEX | Large Blend | 15.71 | 14.19 | 0.1 |
Nationwide S&P 500 Index Instl Svc | GRISX | Large Blend | 15.5 | 13.74 | 0.42 |
Mutual of America Equity Index Instl | MAEQX | Large Blend | 15.72 | 14.15 | 0.12 |
Columbia Large Cap Index Z | NINDX | Large Blend | 15.74 | 14 | 0.2 |
Northern Stock Index | NOSIX | Large Blend | 15.83 | 14.03 | 0.1 |
Dreyfus S&P 500 Index | PEOPX | Large Blend | 15.25 | 13.75 | 0.5 |
T. Rowe Price Equity Index 500 | PREIX | Large Blend | 15.67 | 13.9 | 0.27 |
Prudential Stock Index Z | PSIFX | Large Blend | 15.69 | 13.99 | 0.25 |
PNC S&P 500 Index I | PSXIX | Large Blend | 15.69 | 13.92 | 0.27 |
Shelton S&P 500 Index Direct | SPFIX | Large Blend | 15.62 | 13.95 | 0.36 |
SSgA S&P 500 Index N | SVSPX | Large Blend | 15.83 | 14.04 | 0.15 |
Schwab® S&P 500 Index | SWPPX | Large Blend | 15.87 | 14.11 | 0.09 |
USAA S&P 500 Index Member | USSPX | Large Blend | 15.68 | 13.91 | 0.25 |
Vanguard 500 Index Inv | VFINX | Large Blend | 15.79 | 14.04 | 0.17 |
Vantagepoint 500 Stock Index I | VPFIX | Large Blend | 15.52 | 13.76 | 0.4 |
VALIC Company I Stock Index | VSTIX | Large Blend | 15.55 | 13.81 | 0.35 |
Vanguard Total Stock Mkt Idx Inv | VTSMX | Large Blend | 16.1 | 14.36 | 0.17 |
S&P 500 | S&P 500 | 15.69 | 13.99 | 0.24 |
Large growth: Invests in big U.S. companies projected to grow faster than other large-cap stocks.
Name | Ticker | Stock Industry/Fund Category | % Total Return 3 Year | % Total Return 5 Year | % Expense Ratio |
|---|---|---|---|---|---|
Fidelity® Nasdaq Composite Index® | FNCMX | Large Growth | 17.41 | 16.42 | 0.29 |
Shelton Nasdaq-100 Index Direct | NASDX | Large Growth | 17.64 | 18.29 | 0.49 |
Vanguard Growth Index Inv | VIGRX | Large Growth | 16.13 | 15.26 | 0.23 |
Large Growth | Large Growth | 17.06 | 16.66 | 0.34 |
Large value: Invests in large U.S. companies with intrinsic value greater than their stock market value.
Name | Ticker | Stock Industry/Fund Category | % Total Return 3 Year | % Total Return 5 Year | % Expense Ratio |
|---|---|---|---|---|---|
Vanguard Value Index Inv | VIVAX | Large Value | 15.65 | 13.01 | 0.23 |
Large Value | Large Value | 15.65 | 13.01 | 0.23 |
Total market: Invests in S&P 500 stocks as well as large, mid-cap and small companies not included in the S&P 500 index.
Name | Ticker | Stock Industry/Fund Category | % Total Return 3 Year | % Total Return 5 Year | % Expense Ratio |
|---|---|---|---|---|---|
Fidelity Spartan® Total Market Idx Inv | FSTMX | Large Blend | 16.13 | 14.41 | 0.1 |
T. Rowe Price Total Equity Market Idx | POMIX | Large Blend | 16.24 | 14.28 | 0.35 |
Schwab Total Stock Market Index | SWTSX | Large Blend | 16.17 | 14.46 | 0.09 |
Vantagepoint Broad Market Index I | VPMIX | Large Blend | 15.82 | 14.07 | 0.4 |
Vanguard Total Stock Mkt Idx Inv | VTSMX | Large Blend | 16.1 | 14.36 | 0.17 |
Total Market | Total Market | 16.09 | 14.32 | 0.22 |
Mid-cap blend: Invests in U.S. stocks of various sizes and styles, including growth and value.
Name | Ticker | Stock Industry/Fund Category | % Total Return 3 Year | % Total Return 5 Year | % Expense Ratio |
|---|---|---|---|---|---|
Fidelity Spartan® Mid Cap Idx AdvtgInstl | FSMDX | Mid-Cap Blend | 17.8 | -- | 0.04 |
Mutual of America Mid Cap Equity Index | MAMQX | Mid-Cap Blend | 16.73 | 15.35 | 0.12 |
Columbia Mid Cap Index Z | NMPAX | Mid-Cap Blend | 16.65 | 15.2 | 0.2 |
Northern Mid Cap Index | NOMIX | Mid-Cap Blend | 16.7 | 15.18 | 0.15 |
Dreyfus MidCap Index | PESPX | Mid-Cap Blend | 16.29 | 14.96 | 0.5 |
VALIC Company I Mid Cap Index | VMIDX | Mid-Cap Blend | 16.54 | 15.07 | 0.36 |
Vantagepoint Mid/Small Company Index I | VPSIX | Mid-Cap Blend | 16.6 | 15.03 | 0.4 |
Midcap blend | Midcap blend | 16.76 | 15.13 | 0.25 |
Extended index: Invests in mid-cap and small-cap companies not included in the S&P 500 index.
Name | Ticker | Stock Industry/Fund Category | % Total Return 3 Year | % Total Return 5 Year | % Expense Ratio |
|---|---|---|---|---|---|
Fidelity Spartan® Extended Mkt Index Inv | FSEMX | Mid-Cap Blend | 17.07 | 15.65 | 0.1 |
T. Rowe Price Extended Equity Market Idx | PEXMX | Mid-Cap Blend | 17.58 | 15.82 | 0.4 |
USAA Extended Market Index | USMIX | Mid-Cap Blend | 16.63 | 15.05 | 0.48 |
Vanguard Extended Market Idx Inv | VEXMX | Mid-Cap Blend | 17.25 | 15.53 | 0.23 |
Extended Market | Extended Market | 17.13 | 15.51 | 0.3 |
Foreign large blend: Invests in large-cap foreign stocks with market capitalizations greater than $5 billion. These funds typically have fewer than 20 percent of assets invested in U.S. stocks.
Name | Ticker | Stock Industry/Fund Category | % Total Return 3 Year | % Total Return 5 Year | % Expense Ratio |
|---|---|---|---|---|---|
Fidelity® Series Global ex US Index | FSGEX | Foreign Large Blend | 6.43 | 4.62 | 0.2 |
Fidelity Spartan® Glb ex USIdxAdvtg®Inst | FSGGX | Foreign Large Blend | 6.42 | -- | 0.1 |
Fidelity Spartan® International Idx Inv | FSIIX | Foreign Large Blend | 9 | 6.13 | 0.2 |
T. Rowe Price International Eq Index | PIEQX | Foreign Large Blend | 8.49 | 5.62 | 0.5 |
Schwab International Index | SWISX | Foreign Large Blend | 9.03 | 5.86 | 0.19 |
Vanguard Total Intl Stock Index Inv | VGTSX | Foreign Large Blend | 6.79 | 4.61 | 0.22 |
Vanguard Developed Markets Idx Admiral | VTMGX | Foreign Large Blend | 9.13 | 5.94 | 0.09 |
Foreign Large Blend | Foreign Large Blend | 7.89 | 5.46 | 0.21 |
Emerging markets: Invests at least 50 percent of holdings in emerging markets.
Name | Ticker | Stock Industry/Fund Category | % Total Return 3 Year | % Total Return 5 Year | % Expense Ratio |
|---|---|---|---|---|---|
Fidelity Spartan® EMkts Idx Advtg Instl | FPADX | Diversified Emerging Mkts | 1.18 | -- | 0.1 |
Vanguard Emerging Mkts Stock Idx Inv | VEIEX | Diversified Emerging Mkts | 0.79 | 1.5 | 0.33 |
Emerging Market | Emerging Market | 0.99 | 1.5 | 0.22 |
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