The index fund made its claim to fame for triggering a decades-long, industry-wide decline in investment-fund fees. The logic is pretty straightforward: You’re paying a lot less for management when “management” is a largely algorithm-based system rather than a team of humans researching and picking stocks.
But if index funds were merely cheap, they wouldn’t have much allure.
We love index funds because many of them are simply better than the competition. The S&P 500 might be ubiquitous because it’s a fitting representation of the U.S. economy, but it also churns out better returns year in and year out than human managers can muster.
While most people equate index funds and exchange-traded funds (ETFs), they’re not the same thing. You can get indexed mutual funds, and they can be every bit as inexpensive as equivalent ETF products. So if you’re dealing with an account in which you have the option to own mutual funds (or if you’re working with a 401(k) in which they’re the only option), it’s helpful to be aware of some of the best index mutual funds in the space.
Today, I’m going to highlight a trio of my favorite indexed mutual funds—two equity products and a bond fund—covering three distinct strategies.
Editor’s Note: The tabular data appearing in this article is up-to-date as of July 22, 2026.
Disclaimer: This article does not constitute individualized investment advice. Individual securities, funds, and/or other investments appear for your consideration and not as personalized investment recommendations. Act at your own discretion.
How I Selected These Funds
I start virtually every review of investment funds by booting up Morningstar Investor and running a quality screen I customize for each article.
If you’re newer to investing: There are plenty of great investment analysis sites out there, but nothing beats Morningstar for information about (and analysis of) mutual funds and ETFs. I use my Morningstar Investor subscription to screen for funds that meet certain quality, price and other criteria for my articles, though investors can also use it to track their portfolio, build watchlists, look at charts and more. (And if you’re curious about Morningstar Investor, read to the end.)
Here’s a look at the criteria I used to narrow my search:
1. Index funds with a Gold Morningstar Medalist rating. Morningstar has two ratings systems—the Star ratings and the Medalist ratings. The latter are a forward-looking analytical view of a fund. Per Morningstar:
“For actively managed funds, the top three ratings of Gold, Silver, and Bronze all indicate that our analysts expect the rated investment vehicle to produce positive alpha relative to its Morningstar Category index over the long term, meaning a period of at least five years. For passive strategies, the same ratings indicate that we expect the fund to deliver alpha relative to its Morningstar Category index that is above the lesser of the category median or zero over the long term.”
A Medalist rating doesn’t mean Morningstar is necessarily bullish on the underlying asset class or categorization. It’s merely an expression of confidence in the fund compared to its peers.
2. No loads. In addition to annual expenses, some funds charge additional fees, including “loads.” For instance, if you invested $10,000 in a mutual fund with a 5% front-end load, the mutual fund company would immediately take $500 out in fees. So, you’d already be starting behind the 8-ball, investing just $9,500 to start with. The funds here have no sales charges.
3. Reasonable investment minimums. The maximum investment minimum for inclusion is $3,000, which is the common investment minimum for Vanguard funds. But most of the remaining funds on this list have either no minimum requirement, or a minimum of just $1. Also, some fund providers explicitly lay out lower investment minimums for specific retirement plans, such as individual retirement accounts (IRAs).
4. Broad availability: Mutual funds commonly have several share classes, many of which are limited to certain types of accounts, like, say, only for 401(k)s or only for wealth management clients. All of the index funds listed here are Investor-class or similar shares that are generally considered to be widely available to retail investors.
3 of My Favorite Index Funds
From the much more manageable resulting list, I’ve selected a group of index funds that provide a wide array of core and tactical strategies, ensuring there’s at least one fund, if not many funds, for just about everyone.
Let’s take a look at the list!
(Editor’s note: This list is exclusively index mutual funds—but you can find a plethora of great index ETFs in our best ETFs list.)
1. Vanguard Small Cap Index Fund Admiral Shares
- Style: U.S. small-cap stock
- Assets under management: $188.6 billion*
- Dividend yield: 1.2%
- Expense ratio: 0.05%, or 50¢ per year for every $1,000 invested
- Minimum initial investment: $3,000
The market’s smallest companies are considered some of the most fertile ground for growth-hungry investors … as long as they’re not terribly risk-averse.
A basic business concept is that the larger your company, the harder it is to sustain high growth rates. (And conversely, the smaller your company, the easier a time you should have delivering rapid growth.) As it was aptly explained to me: “It’s a lot easier to double your revenues when you’re starting from $1 million instead of $1 billion.” These stocks can also get a lift when they start hitting the radar of institutional investors and fund managers, or begin qualifying for certain indexes that force index funds to buy them.
The other side of this quid pro quo is risk. Revenues might be dependent on fewer products or services—meaning a single disruption could have massive financial consequences. They usually also have less access to capital than their larger peers, so they’re less likely to get a lifeline should they suffer from broader economic headwinds. Thus, small caps are the definition of “high risk, high reward.”
However, you can harness small caps’ upside while mitigating some of that risk by investing in a large basket of these companies. That’s where products such as the Vanguard Small-Cap Index Fund Admiral Shares (VSMAX) come in.
Related: 11 Best Vanguard Funds for the Everyday Investor
What does it hold?
Vanguard scatters that risk across 1,310 U.S. stocks. To be precise, they’re not all “true” small caps—a good third of the portfolio includes smaller mid-cap stocks. And like with FSMDX, single-stock risk is extremely minimal in VSMAX. No company accounts for more than 1% of assets. In fact, the largest component right now—fabless semiconductor firm Credo Technology Group (CRDO)—is weighted at just half a percent. These tiny weightings mean you won’t enjoy the full potential of wild upside in any single stock, but you also won’t feel the full brunt of a stock collapse, either.
Similar to many Vanguard index funds, Vanguard Small-Cap Index Fund is also available as an ETF: The Vanguard Small-Cap ETF (VB, 0.03% expense ratio), which goes for around $295 per share currently.
* Many Vanguard funds have multiple share classes, including ETFs. Listed net assets for Vanguard funds in this story refer to assets under management across all of a given fund’s share classes.
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2. Schwab Total Stock Market Index Fund
- Style: U.S. all-cap stock
- Assets under management: $44.3 billion
- Dividend yield: 1.0%
- Expense ratio: 0.03%, or 30¢ per year for every $1,000 invested
- Minimum initial investment: $1
What if you just wanted to own U.S. stocks of all sizes? Well, there’s a whole class of mutual funds for you, too.
“Total market” funds hold stocks of all sizes. For instance, the Schwab Total Stock Market Index Fund (SWTSX) says right on its provider page that it’s designed to “track the total return of the entire U.S. stock market.”
What does it hold?
If I’m nitpicking, SWTSX’s 2,836 stocks aren’t exactly “the entire U.S. stock market.” But if I’m being pragmatic, it’s as close as you’d ever need to get.
Total-market funds rarely provide even exposure to different stock sizes, however. They’re usually market cap-weighted, which results in heavy concentration in larger companies. Schwab Total Stock Market Index Fund, for instance, invests about 70% in large caps (like with the S&P 500 fund, Nvidia, Apple, and Alphabet are top weights here), 20% in mid-caps, and the remaining 10% in smalls. And a reminder: That’s Schwab Total Stock Market Index’s current composition, but it can change over time.
Related: 10 Best Dividend Mutual Funds to Boost Your Income
The point of a total-market fund like SWTSX is simplicity. One fund gives you exposure to virtually all of the U.S. stock market—and it overloads you in the largest, most stable firms while providing only modest exposure to smaller, more volatile firms. Better still? You can get all this for just 0.03% in annual expenses. It’s a one-two punch of coverage and price that has been recognized with a Morningstar Gold Medalist rating, inclusion on my list of Schwab’s top mutual funds, and a place here among the best index funds you can buy.
How (or whether) you use it is a matter of preference.
If you like the exact breakdown of SWTSX’s large-, mid-, and small-cap exposure, you could make it the core of your portfolio and not have to bother with any other broad U.S. stock funds.
If you like the idea of owning all these different-sized stocks, but would want to do so in different ratios, you could either hold SWTSX and augment with the funds above, or buy your ideal mixture of large-, mid-, and small-cap funds.
Related: 7 Best AI ETFs for the Artificial Intelligence Era
3. Fidelity Freedom Index Funds
- Style: Target-date
- Assets under management (collectively): $209.6 billion
- Expense ratio: 0.12%, or $1.20 per year for every $1,000 invested
- Minimum initial investment: None
OK, technically, my final pick is actually 14 funds. So you got more than you bargained for.
Target-date funds (TDFs) are the ultimate buy-and-hold instrument, meant to stay in your portfolio for literally decades.
TDFs are funds that shift their asset allocation over time to meet investors’ changing needs as they age. A person who turned 25 in 2025 might expect to retire in 2065, so they’d buy a fund with a target retirement date of 2065. That fund will probably start out with a very heavy allocation to stocks (to grow the investors’ wealth), but as the years roll on and the fund approaches its target retirement date, it will start putting more of its assets into bonds (to protect the investors’ wealth).
Many fund providers have at least one target-date series, though larger asset managers sometimes offer more. Fidelity is well outside the norm, however, with a whopping four—and the highest-rated among them are the Fidelity Freedom Index Funds.
Related: 7 Best Fidelity Funds to Hold in an HSA
What do they hold?
You can read our coverage of Fidelity’s full set of target-date lineups to get a better idea of how these funds work. But you should know that Fidelity Freedom Index Funds, which are built exclusively from Fidelity’s lineup of low-cost index funds, are a rarity—few target-date series can boast a Gold Medalist rating. That rating is due in no small part to extremely low costs. Unlike actively managed target-date funds whose management fees tend to be different across the series, all Fidelity Freedom Index Funds charge the same fee (0.12%).
Here’s a quick look at the full lineup:
- Fidelity Freedom Index 2010 Fund (FKIFX)
- Fidelity Freedom Index 2015 Fund (FLIFX)
- Fidelity Freedom Index 2020 Fund (FPIFX)
- Fidelity Freedom Index 2025 Fund (FQIFX)
- Fidelity Freedom Index 2030 Fund (FXIFX)
- Fidelity Freedom Index 2035 Fund (FIHFX)
- Fidelity Freedom Index 2040 Fund (FBIFX)
- Fidelity Freedom Index 2045 Fund (FIOFX)
- Fidelity Freedom Index 2050 Fund (FIPFX)
- Fidelity Freedom Index 2055 Fund (FDEWX)
- Fidelity Freedom Index 2060 Fund (FDKLX)
- Fidelity Freedom Index 2065 Fund (FFIJX)
- Fidelity Freedom Index 2070 Fund (FRBVX)
- Fidelity Freedom Index Income Fund (FIKFX)
That last product, Fidelity Freedom Index Income Fund, is designed for people who have reached retirement, and it boasts the most conservative asset blend. When a Fidelity Freedom Index target-date fund expires, it merges with Fidelity Freedom Index Income.
So, why do Fidelity Freedom Index Funds stand out? Well, at least within the Fidelity lineups, here’s a comparison from our Charles Sizemore:
“We’ll compare the Fidelity Freedom 2065 Fund to its indexed sister fund, the Fidelity Freedom Index 2065 Fund (FFIJX). The index-only Fidelity Freedom fund has an expense ratio of just 0.12% compared to 0.68% for the active target-date fund. Those 56 basis points (a basis point is one one-hundredth of a percentage point) might not sound like much of a difference, but over time it compounds. Over the course of 10 years, if performance is equal, the index fund will make about 13 percentage points more overall due to the lower fees—and the difference will get wider with time.”
Related: Best Target-Date Funds: Fidelity vs. Schwab vs. T. Rowe vs. Vanguard
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Learn More About These and Other Funds With Morningstar
As I mentioned before, Morningstar Investor is a vital tool in my research, but it’s primarily designed for investors. And because the folks at Morningstar appreciate my years of citing their tool in my research, they’re allowing us to offer their Investor service at a discounted rate.
If you sign up using my exclusive link, you’ll not only get a 20% discount ($199) off the normal annual rate ($249), but you’ll also get a free 7-day trial so you can give it a go first!
Editor’s Note: This is a shorter, updated, and modified version of our full exploration of the market’s top index funds. If you want to see all 10 selections for 2026, check out our article, The 10 Best Index Funds You Can Buy for 2026.
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