9 Best Index Funds to Buy and Hold (2024)

Though normal circ*mstances dictate that wagering on individual stocks provides the best chance for maximum upside potential, the post-pandemic realities suggest that the best index funds to buy may represent the most appropriate choice forward. Primarily, this thesis comes down to diversification. With so many ways for the capital markets and the global economy to go wrong, you want to paint with the broadest canvas possible.

Furthermore, this diversification principle doesn’t just benefit from the wide number of companies to which a fund is exposed to. Rather, should certain names not perform as anticipated, the other companies on the list could potentially help pick up the slack. Since it’s extraordinarily difficult to know which individual name has the right stuff in this environment, the best index funds to buy provide some much-needed confidence.

Finally, holding viable funds can be an efficient way to steadily grow your wealth. Many of the best index funds to buy also feature low expense ratios or the cost associated with holding a fund for a period of one year. Along with their wide range and relatively safe profile — though, nothing is 100% safe in the capital markets — index funds may be no-brainers at this juncture.

So, let’s dive in and take a closer look at nine index funds for investors to take a closer look at.

Best Index Funds: SPDR S&P 500 ETF Trust (SPY)

The classic exchange-traded fund, the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) is a great place to start for investors seeking to navigate the current treacherous waters. True, the SPY ETF attempts to track the performance of the S&P 500 index, which to be frank isn’t doing too well. On a year-to-date (YTD) basis through the June 6 session, the S&P 500 is down 14%.

However, with the U.S. being the world’s biggest economy along with leveraging the world’s reserve currency, it’s honestly the market to bet on for the long run. Featuring an average volume of 101.3 million units, exposure to the SPY is a no-brainer for patient investors, thus making it one of the best index funds to buy.

Fidelity ZERO Large Cap Index (FNILX)

A mutual fund that tracks the performance of some of the biggest stocks in the market, Fidelity ZERO Large Cap Index (MUTF:FNILX) gets its name because of its cost structure. Featuring a total absence of an expense ratio, Fidelity ZERO is one of the most efficient ways to gain exposure to a basket of industry stalwarts.

As of April 30, 2022, FNILX focuses the most on the information technology sector, representing 28.45% of portfolio weight. Next up is healthcare, featuring a 14.1% allocation followed by the consumer discretionary sector at 11.15%.

To be fair, Fidelity ZERO is down almost 15% due to exposure to struggling technology firms. However, for long-term investors, FNILX may be an attractive discount.

Best Index Funds: Schwab U.S. Mid-Cap ETF (SCHM)

While large capitalization firms will always attract the most headlines, many investors prefer the balanced approach of mid-cap companies. Benefiting from a mixture of upside growth potential and the stability associated with big businesses, the Schwab U.S. Mid-Cap ETF (NYSEARCA:SCHM) is ideal for those who may have a conservative investment profile but still want some spice to shore up returns.

Better yet, with the SCHM fund, you can enjoy exposure to mid-cap names very cheaply as it has an expense ratio of only 0.04%. In contrast, the category average is 0.39%. Interestingly, Schwab U.S. Mid-Cap ETF features some independent oil and gas companies, which may help bolster performance down the line.

Vanguard Mid-Cap Index Fund (VIMAX)

Another low-cost option for exposure to mid-cap companies, Vanguard Mid-Cap Index Fund (MUTF:VIMAX) is one of the best index funds to buy for diversification at a very low cost. With an expense ratio of 0.05%, it more than beats out the category average of 1.03%.

As of May 18, 2022, VIMAX “has assets totaling almost $49.65 billion invested in 382 different holdings.” Currently, the fund is most focused on the technology sector with a 20.2% portfolio weight. Coming in second place is financial services at 11.35%, followed very closely by industrials at 11.29%.

However, with an eclectic mix of companies ranging from software to petroleum to retirement care services, VIMAX is well prepared to handle whichever direction the market moves.

Best Index Funds: Fidelity Small Cap Index (FSSNX)

Generally speaking, financial advisors will recommend their clients focus on well-established businesses. While they might not be the most exciting options for growing your money, they’re also the least likely to lose it. However, intrepid investors can still leverage the benefits of the best index funds to buy while dipping into speculative fare. One example is Fidelity Small Cap Index (MUTF:FSSNX).

Enjoying a net expense ratio of only 0.03%, Fidelity Small Cap carries a significant advantage over the competition, with the category average being 1.04%. While it might be focused on speculative ideas — for instance, a certain cineplex operator that shall not be named — FSSNX is well diversified.

Its top holdings in the healthcare sector with a portfolio weighting of 15.5%, followed closely by financial services at 15.5% and industrials at 15.2%.

Northern Small Cap Index (NSIDX)

Another way to exercise your speculative juices without being forced to sign divorce papers, the Northern Small Cap Index (MUTF:NSIDX) is one of the best index funds to buy for those folks who like to jump out of airplanes but with a parachute — and a reserve chute if the primary fails.

As with most of the ideas on this list, NSIDX is relatively cheap to own, featuring a net expense ratio of 0.15%. Compare that to the category average of 1.04%. Interestingly, Northern Small Cap is similarly diversified as Fidelity Small Cap above. Northern’s top sector is healthcare with a 16.5% portfolio weighting, followed by industrials (15.3%) and financial services (14.6%).

Finally, Northern is really aiming to knock one out of the park, featuring exposure to meme stocks and one rental car service firm.

Best Index Funds: Vanguard Energy ETF (VDE)

One of the best index funds to buy based on sheer performance metrics, the Vanguard Energy ETF (NYSEARCA:VDE) is kicking the proverbial hind end and taking names. Since the start of the year, VDE is up a staggering 61%. That’s not surprising given that the underlying energy market has received a shot of relevance. But can this upswing last?

According to experts, yes. Because the crude oil market suffered a catastrophic loss in the spring of 2020, producers are not exactly in a hurry to overextend themselves, understanding perhaps that recession fears are serious. Therefore, it’s not just about inflation — out will likely remain challenged as producers are still gun shy.

Also noteworthy is that VDE features an expense ratio of 0.10%, far lower than the category average of 0.43%. Technically, then, it’s a relatively cheap way to play the energy sector.

SPDR Kensho Clean Power ETF (CNRG)

Although the hydrocarbon market has been going bonkers this year, a growing number of investors are concerned about feeding the fossil fuel industry with their money. Others might not have an objection to the segment but still prefer arenas that are tied to future development. After all, at some point, big oil giants may lose significant ground.

To meet these and other concerns, investors have the option of going with SPDR Kensho Clean Power ETF (NYSEARCA:CNRG), one of the best index funds to buy for the potential future of energy infrastructures. Tied to a variety of wind, solar and even geothermal energy companies, SPDR Kensho is the way to go if you prefer clean and sustainable but are not sure which individual stocks to pick.

While intriguing, prospective buyers should be aware that CNRG has an expense ratio of 0.45%, which is higher than the category average of 0.43%.

Best Index Funds: USA Mutuals Vice Fund (VICEX)

While arguably few people will publicly admit to thinking cynically, if a recession happens, certain events will likely rise to the forefront. In particular, vice behaviors may escalate. For example, evidence indicates that following the Great Recession, alcohol sales increased conspicuously, implying that certain vice-oriented companies might perform well in a downturn.

So, if you’re looking for the best mutual funds tied to this subsegment, USA Mutuals Vice Fund (MUTF:VICEX) might be something of interest. Among its top holdings are alcohol and tobacco firms which may enjoy rising demand should hard times hit. As well, USA Mutuals Vice features a number of defense contractors, which obviously has implications for the ongoing military conflict in eastern Europe.

However, there’s a price to be paid for this much “fun” and that is its expense ratio of 1.59%, whereas the category average is 0.98%.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing Guidelines.