Index Funds

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Index funds are mutual funds that track major markets or industry sectors. Because index funds are not managed (do not research stocks or regularly buy and sell stocks), their expenses are very low and do not erode your total returns. Managed funds research, buy and sell stocks so their fees are higher than index funds. Managed funds can out perform index funds but more often managed funds under perform index funds.

If you want to participate in the stock market, but don't want to pick from the thousands of managed mutual funds that buy and sell stocks, choose a low-fee index fund.

Index funds are ideal for the busy person, who does not have the time to follow individual stocks. With an index fund you own many stocks so you are have a ready made diversified stock portfolio.

Some low-cost all-in-one funds, designed for retirement portfolios, are composed of index funds.

Low-fee Index Funds

Index funds are quite popular with buy-and-hold investors because of their lows fees and diversification. There are dozens of index funds. I selected twelve low-fee equity-income funds offered by well-known and respected mutual fund companies. These funds have excellent long-term performance records. Be sure to elect to reinvest dividends and capital gains when you set up your account. The table includes the home page for each fund company.

Low-fee Index Funds
Fund	Symbol	Estimated 10-year Expenses*	Tracks	Comments
Fidelity Four-in-One Index	FFNOX	$211	Four indices.	Lowest expense ratio - 0.08%.
Vanguard 500 Index Fund	VFINX	$230	Standard & Poor's 500 Index	The S&P 500 consists of primarily large companies. Professional investors use the S&P to benchmark the performance of other investments.
Vanguard Total Stock Market Index Fund	VTSMX	$255	Wilshire 5000 Total Market Index	Broadest market index includes around 6,300 companies from large to small.
Vanguard Mid-Cap Index Fund	VIMSX	$318	MSCI® US Mid Cap 450 Index	A mix of growth and value medium size companies.
Vanguard Small-Cap Index Fund	NAESX	$343	MSCI® US Small Cap 1750 Index	A mix of growth and value small size companies.
Fidelity Spartan 500 Index	FSMKX	$480	Standard & Poor's 500 Index	The S&P 500 consists of primarily large companies.
T. Rowe Price Extended Equity Market Index Fund	PEXMX	$505	Wilshire 4500 Index	Includes small and mid-size companies from the Wilshire 4500.Wilshire 4500 Index does not include companies in the S&P 500.
T. Rowe Price Equity Index®	PREIX	$512	Standard & Poors 500® Stock Index	The S&P 500 consists of primarily large companies.
Fidelity Total Market Index Fund	FSTMX	$579	Wilshire 5000 Total Market Index	Tracks all stocks in the market.
Schwab 1000 Investor	SNXFX	$624	Schwab 1000 Index®	Tracks the 1,000 largest publicly traded U.S. companies.
Fidelity Extended Market Index Fund	FSEMX	$665	Wilshire 4500 Index	Includes small and mid- size companies from the Wilshire 4500.Wilshire 4500 Index does not include companies in the S&P 500.
TIAA-CREF Equity Index	TCEIX	$869	Russell 3000™	3,000 largest U.S. companies.
Fidelity Nasdaq Composite Index Fund	FNCMX	Not Available	Nasdaq Composite Index.	Nasdaq includes many technology companies and small companies. The index is quite volatile.

* The 10-year estimated expenses are for an initial $10,000 investment and are taken from finance.yahoo.com.

More Information

To learn more about index funds see the following sites:

Indexfunds.com

The Motley Fool

The Vanguard Group