The stock market offers many different opportunities for investors. With so much choice, it can be difficult to decide which one to choose. That’s why total stock market index funds are a great option for investors who want to diversify their portfolio and enjoy both short-term and long-term growth. Total stock market index funds are a type of mutual fund which tracks a broad market index like the S&P 500, allowing investors to hold a basket of stocks that represents the stock market as a whole. In this article, we’ll take a closer look at the best total stock market index funds, what they are and how to invest in them. We’ll also discuss some of their benefits, potential risks and other important considerations.
What Are Total Stock Market Index Funds?
Total stock market index funds are mutual funds that track an index, such as the Wilshire 5000 or Standard & Poor’s 500 (S&P 500), providing a simple way to invest rather than selecting individual stocks. By investing in a total stock market fund, you gain ownership of over 3,000 stocks, representing more than 95% of the U.S. marketplace. Unlike actively managed mutual funds, total stock market index funds are passively managed. This means that the manager of the fund doesn’t try to pick the best stocks, but instead, the fund automatically holds stocks that represent the index it tracks.
Why Invest in Total Stock Market Index Funds?
Total stock market index funds are an excellent option for investors looking to diversify their portfolio, earn long-term gains and avoid one or a few stocks or sectors crashing their portfolio value. Investing in total stock market funds also provides a cheaper option compared to investing in individual stocks, as the portfolio is broadly diversified and makes fewer portfolio trades, saving you money on trading fees. Finally, total stock market index funds provide a low-risk way to invest in the stock market, as the value of the fund follows the market index it’s tracking.
What Are the Best Total Stock Market Index Funds?
When it comes to total stock market index funds, there are a few that stand out from the rest for various reasons. Here are our top picks for the best total stock market index funds:
• BlackRock iShares Core S&P Total Stock Market ETF (ITOT): An index fund easily accessible through many brokerages, such as Vanguard and Fidelity.
• Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX): An index fund with no minimum investment requirement and a Vanguard-exclusive, commission-free exchange-traded fund version.
• Schwab Total Stock Market Index Fund Investor Shares (SWTSX): An index fund accessible at Schwab, with no minimum investment requirement and low expense ratios.
• Fidelity ZERO Total Market Index Fund (FZROX): A commission-free exchange-traded fund with no minimum investment requirement and low expense ratio.
• Fidelity Total Market Index Fund (FSKAX): An index mutual fund available through Fidelity with a minimum investment of $2,500 and a low expense ratio.
Considerations Before Investing in Total Stock Market Index Funds
Before investing in a total stock market index fund, it’s important to take the time to understand the key considerations. Here are some points to consider before investing in a total stock market index fund:
• Diversification: Total stock market index funds provide an easier way to diversify your portfolio. But, as with all investments, it’s important to consider both your overall strategy and risk profile before investing.
• Low Expense Ratios: Total stock market index funds typically have low expense ratios compared to actively managed mutual funds, which can save you money in the long run.
• Stability and Reliability: Total stock market index funds provide the stability of tracking a broad market index, which is generally more reliable than investing in individual stocks.
• Tax Efficiency: Total stock market index funds are a tax-efficient way to invest in the stock market, as they generate fewer capital gains.
• Research: To ensure you’re investing in the best total stock market index funds, research the fund’s performance and fees to make sure it aligns with your investment strategy.
Total stock market index funds are an excellent option for investors who want to diversify their portfolio, earn long-term gains and avoid the risks associated with picking individual stocks. Total stock market index funds are passively managed and track an index, such as the Wilshire 5000 or S&P 500, allowing investors to gain exposure to a wide range of stocks with fewer portfolio trading costs. Before investing in a total stock market index fund, it’s important to research the fund’s performance, fees and other factors to determine if it’s the right investment option for you. With the right research and understanding, total stock market index funds can be a great way to grow your wealth in the long run.
