The top index funds in 2023 are the ones that have three main aspects:
Low expense ratiosHigh diversificationResisting through the “tests of time”
However, not all index funds are diversified enough to be top-notch.
Others may not be ideal for long-term investments.
With a wide variety of funds to choose from, it’s crucial for prospective investors to understand which index funds can best meet their needs.
This is especially true given the uncertainty that 2023 will bring.
Many ETFs (exchange traded funds) and index funds have been launched recently.
But don’t be fooled by the notion that all ETFs and index funds are great long-term investments.
Many of these funds focus on a narrow industry sector, including options like online media, MLPs, or biotechnology.
These funds are very narrowly focused. They can offer great return potential in the short term.
However, they can also experience massive drops if the industry is hit.
Additionally, these funds tend to have higher expense ratios compared to broader index funds.
The best index funds in 2023 are those that are cheap and broadly diversified.
That’s why we’ve cultivated some of the best index funds for 2023 to buy for long-term holding and investing purposes.
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Strongest S&P 500-Based Index Funds for 2023
The S&P 500 Index is the gold standard of funding priorities. They are an index of 500 stocks of some of the largest companies in the United States by market capitalization and are a wonderful indicator of overall market performance. The top three S&P 500-based index funds are VFINX, FXAIX, and SWPPX.
VFIAX (VFINX): Admiral shares of the Vanguard 500 Index Fund
VFINX is the godfather. VFINX was the first index fund to be made available to the public. It spawned the concept of Jack Bogle, founder of Vanguard Investments. Bogle had studied the markets and found that many investors and portfolio managers were unable to outperform market averages over the long term. This applies in particular when considering the expenses for fund management.
VFIAX has now acquired VFINX and has the same minimum investment size as VFINX, except at a fraction of the price
By simply buying low-cost mutual funds (a handful of stocks included in an index), it was found that investors could earn decent returns instead. With that, the Vanguard 500 Index was born.
Expense ratio: 0.04% | Minimum investment: $3,000; Expense ratio: 0.14% | Minimum investment: $10,000
FXAIX: The Fidelity Spartan 500 index fund
Fidelity’s level of experience, market size and ability to compete with Vanguard speak for this index fund. In our opinion, the FXAIX is the second best index fund for 2023. Index funds are often indistinguishable from major competitors in terms of performance and costs.
Basically, the competitive nature of FXAIX as compared to VFINX creates the development of far higher quality funding for investors. FXAIX and VFINX hold the exact same stocks. However, these stocks have a lower expense ratio and a lower minimum initial investment (entry point).
Expense ratio: 0.01% | Minimum investment: $2,500
SWPPX: The Schwab S&P 500 index fund
Charles Schwab has long strived to offer its users much more than a standard, discounted brokerage service for their investors. Instead, they’ve recently dived into the S&P 500 index fund markets and are poised to take on the likes of Fidelity and Vanguard.
They’ve recently trimmed their spending to slightly outperform Fidelity, and with a far lower minimum initial investment, this fund is available to most anyone looking to enter the S&P 500-based index fund market in 2023.
Expense ratio: 0.02% | Minimum investment: $1.0
Best performing market-based index funds overall for 2023
Sometimes exposure to over five hundred American large-cap stocks isn’t that diverse for some. In these cases, the entire stock exchange funds are available. These funds invest in thousands of stocks, including a solid mix of large-cap, small-cap, and mid-cap stocks. Vanguard and Schwab have cornered the Total Stock Market index fund market for 2023.
VTSAX: The Vanguard Total Stock Market Index Fund
The Vanguard Total Stock Market Index is the largest mutual fund in the world. It has reached this level for good reason. Vanguard basically invented the concept of an index fund, and VTSAX is among the first index funds to take over the entire stock market.
With expenses low enough to bring Vanguard’s typically high expense ratios down to 0.04 percent, the Vanguard Total Stock Market Index in 2023 is a wonderful index fund for those looking for a safe bet and a wonderful core fund for those looking for a safe bet any diversified portfolio mutual fund.
Expense ratio: 0.04% | Minimum investment: $3,000
SWTSX: The Schwab Total Stock Market Index Fund
The Schwab Total Stock Market Index, SWTSX for short, has a very low expense ratio of 0.03 percent. It’s a wonderful overall market-based index fund that’s hard to beat, at least at the $0 minimum investment level.
Similar to many other Schwab funds, their minimum purchase price is extremely low and is one of the cheapest funds on our list with a minimum investment of $0.
Expense ratio: 0.03% | Minimum investment: $0
Index funds with the most aggressive levels for 2023
If you are a longer-term investor, you may not be concerned about occasional market fluctuations. In the short term, this means your balances will go up and down. If you don’t mind that, and you’re comfortable with a long-term view, some of these aggressive index funds might be better for you. These are usually index funds with higher risk and higher returns.
VIGAX: The Vanguard Growth Index Fund
The Vanguard Growth Index Fund invests in large-cap stocks that demonstrate strong growth potential. This makes it a bit riskier to invest compared to the index funds mentioned above. However, it can also be far more rewarding over the long term than funds based on the S&P 500.
VIGAX has a medium expense ratio compared to the other aggressive funds we review.
Expense ratio: 0.05% | Minimum investment: $3,000
FNCMX: The Fidelity NASDAQ Composite Index Fund
Fidelity’s index fund consists primarily of large-cap stocks. However, many of these stocks are in the healthcare and technology sectors. These stocks tend to have stronger long-term growth potential relative to broader market movements.
For this reason, over the long term, the Fidelity NASDAQ Composite fund is a great index fund to invest in 2023 if you’re not put off by the idea of added risk for the additional potential for returns. Their expense ratio is on the high end at 0.29 percent, but the minimum investment is lower than Vanguard alternatives at $2,500.
Expense ratio: 0.3% | Minimum investment: $0
VIMAX: The Vanguard mid-cap index fund
Mid-cap stocks are a wonderful alternative to their large-cap counterparts. They’re a great option for potentially beating the mighty S&P 500. These have historically outperformed larger-cap stocks, but don’t incur the significant risk that small-cap stocks do. This makes VIMAX a great midrange index fund to buy. You’re in the sweet spot, which occurs when returns are solid but risk isn’t too extreme.
Their expense ratio is also lower than either of the aggressive funds above. However, like the other Vanguard funds in our list, they have a higher minimum buy-in.
Expense ratio: 0.05% | Minimum investment: $3,000
The strongest bond-oriented index funds for 2023
Bond-based index funds are far better suited to the average investor. Many with well-diversified portfolios of index funds and mutual funds use these fund options. They’re a great vehicle for capturing large chunks of the bond market in a low-fee, low-stress investment.
Overall bond market indices are typically related to index-based mutual funds or ETFs (Exchange Traded Funds). These funds invest in the BarCap Aggregate or the Barclay’s Aggregate Bond Index. This is a broad bond index covering most bonds traded on American indices as well as some foreign bonds traded within the United States.
In 2023 there will be many bond-based index funds that will exceed the need for simplicity and variety. Two of the strongest are VBMFX and FTBFX.
VBMFX: The Vanguard Total Bond Market Index
The Vanguard Total Bond Market Index is the largest existing bond-focused index fund (in terms of assets under management). This means it is one of the most popular options of all time for self-investing buyers and fee-based advisory services. Buying into the VBMFX Index gives buyers access to the entire US bond market. This includes thousands of bonds in many types including:
US Treasury BondsCorporate BondsShort, intermediate and long-term bonds
Expense ratio: 0.15% | Minimum Investment: Closed to new investors
FTBFX: The Fidelity Total Bond Index
The Fidelity Total Bond Index is a great index fund to buy right now, and it’s very similar to the Vanguard option above. Alternatively, the FTBFX has strong flexibility and can balance reward and risk well. It can hold a lot more high yield bonds and because of that can generate far better returns over the long term compared to VBMFX.
However, this comes with a far higher expense ratio at 0.45 percent compared to nearly all of the funds on our list. However, the additional costs of an index fund can be more than worth it.
Expense ratio: 0.45% | Minimum investment: $0
All together: The best index funds for 2023
Some of the best-performing, highest-yielding index funds have been listed as our top picks for 2023. These best buy-and-hold index funds have lower expense ratios than alternatives, are highly diversified, and have proven to be durable in turbulent markets.
Further reading: Learning to invest for beginners
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