What are the best U.S. index funds right now? [2025]
Thanks to their low cost and strong performance, index funds are a popular tool for long-term investors. Depending on a fund’s index, investors can get efficient exposure to asset classes like stocks, bonds, and even real estate. Start your investing journey with 10 of the leading U.S. index funds below.
Which U.S. index fund has the highest return?
One of the strongest-performing U.S. index funds in recent years has been the Alerian MLP ETF ($AMLP). This unique fund tracks the Alerian MLP Infrastructure Index, which consists of energy and oil companies structured as tax-efficient master limited partnerships. Over the past five years, AMLP has posted annualised gains of 30.52%.
While AMLP isn’t a traditional stock or bond fund, this ETF showcases the power of index funds. With an index fund, investors can easily access a diversified portfolio of assets in almost any sector or industry.
Explore these top U.S. index funds from Wall St
Company Name | Ticker | Share Price | 1Y Total Return | AUM | Expense Ratio |
|---|---|---|---|---|---|
SPDR S&P 500 ETF Trust | US$563.98 | +8.51% | US$592.5B | 0.09% | |
Vanguard Total Stock Market ETF | US$278.85 | +8.11% | US$434.0B | 0.03% | |
Vanguard Total Bond Market ETF | US$73.32 | +1.26% | US$127.2B | 0.03% | |
Vanguard FTSE Emerging Markets ETF | US$45.98 | +10.50% | US$81.6B | 0.08% | |
iShares Russell 2000 ETF | US$203.79 | -0.85% | US$63.99B | 0.19% | |
Vanguard FTSE All-World ex-US ETF | US$62.01 | +6.31% | US$39.9B | 0.07% | |
Invesco NASDAQ 100 ETF | US$198.01 | +8.20% | US$38.8B | 0.15% | |
SPDR Dow Jones Industrial Average ETF Trust | US$419.62 | +6.79% | US$36.3B | 0.16% | |
Vanguard Real Estate ETF | US$90.27 | +7.40% | US$33.9B | 0.13% | |
iShares iBoxx $ High Yield Corporate Bond ETF | US$79.22 | +2.11% | US$14.84B | 0.49% |
Data as of 21 March 2025. Source: Stake, Google.
*The list of index fund ETFs mentioned is ranked by assets under management. When deciding what stocks to feature, we analyse the company's financials, recent news and earnings, upcoming dividends, and whether or not they are actively traded on Stake.
Decide which index funds from the U.S. market are right for you
1. S&P 500 ETF Trust SPDR ($SPY)
The S&P 500 ETF Trust SPDR fund tracks the performance of the S&P 500 index, one of the most popular benchmarks for U.S. equity performance. The S&P 500 is made up of 500 of the largest U.S. companies, led by household names like Apple ($AAPL), Nvidia ($NVDA), and Microsoft ($MSFT). You can learn more in our guide on how to invest in S&P 500 from Australia.
SPY can serve as a core long-term holding in an investor’s equity portfolio and features an expense ratio of 0.09%. The fund is the largest ETF in the world, closely followed by fellow S&P 500 index ETF $VOO.
🆚 Compare SPY vs IVV stock comparison→
2. Vanguard U.S. Total Stock Market Index ($VTI)
The Vanguard U.S. Total Stock Market index fund tracks the performance of the entire U.S. stock market, including small, mid, and large-cap stocks. VTI tracks the CRSP US Total Market Index, which covers approximately 100% of U.S. public equities and has nearly 4,000 constituents.
Although investors often index to the S&P 500, broad equity funds like VTI can offer more diversified exposure beyond large-cap stocks. VTI has an expense ratio of just 0.03%.
🆚 Compare VTI vs SPY stock comparison→
3. Vanguard Total Bond Market ETF ($BND)
The Vanguard Total Bond Market Index ETF tracks the performance of the entire investment-grade U.S. bond market, including Treasuries, corporates, and municipal bonds. This ETF is a popular choice as a core component of a fixed-income portfolio.
BND tracks the Bloomberg U.S. Aggregate Float Adjusted Index, a common benchmark for the high-quality U.S. bond market as a whole. The fund focuses on intermediate-term bonds with an average maturity of 8.3 years. BND has a 0.03% expense ratio and a 30-day yield of 4.49%.
We recently covered U.S. bond ETFs more broadly, if the bond market is an area of interest for your portfolio.
4. Vanguard FTSE Emerging Markets Index ETF ($VWO)
The Vanguard FTSE Emerging Markets Index ETF tracks the performance of emerging market stocks in countries like China, Taiwan, Brazil, and South Africa. The fund’s top holdings include leading international companies like TSMC ($TSM) and Tencent Holdings ($TCEHY).
VWO tracks the FTSE Emerging Markets All Cap China A Inclusion Index, which consists of nearly 5,000 companies from small to large caps. The ETF has an expense ratio of 0.08% and could be an effective way for investors to access fast-growing international markets.
5. iShares Russell 2000 ETF ($IWM)
The iShares Russell 2000 index fund tracks the performance of the Russell 2000 Index, which is a popular benchmark for small-cap U.S. stocks. Historically, small caps have outperformed large caps over time, although smaller firms also tend to be riskier.
IWM holds about 2,000 stocks across a diverse array of sectors. The fund has an expense ratio of 0.19% and could be a good fit for investors interested in the high-growth U.S. small-cap space.
6. Vanguard FTSE All-World ex-US ETF ($VEU)
The Vanguard FTSE All-World ex-US ETF index tracks the performance of international stocks outside the U.S. The fund tracks the FTSE All-World ex US Index, which focuses on large and mid-cap equities covering 98% of the world’s equity market capitalisation.
VEU’s top holdings include emerging market companies like TSMC (in Taiwan) as well as developed country holdings like SAP ($SAP) (in Germany). The fund holds nearly 4,000 stocks and could be an efficient way for investors to access the global equity market, with an expense ratio of 0.07%.
7. Invesco NASDAQ 100 ETF ($QQQM)
QQQM is a fund that tracks the NASDAQ-100 Index, which consists of the 100 largest companies listed on the tech-heavy Nasdaq exchange. Compared to its better-known sister fund $QQQ, QQQM offers slightly lower expenses but tracks the same index.
QQQM has an expense ratio of 0.15% and features holdings like Apple, Nvidia, and Microsoft. The fund could be suitable for an investor interested in a low-cost, broadly diversified equity fund with a technology focus. The Nasdaq is a very closely followed index, we covered more assets that focus on it in our guide on the best Nasdaq ETFs to invest in.
8. SPDR Dow Jones Industrial Average ETF Trust ($DIA)
DIA tracks the Dow Jones Industrial Average, an index of 30 of the most prominent U.S. companies. While the composition of the Dow has changed over the index’s history, the benchmark stretches back to 1896, making it the oldest major index in use today.
The Dow sometimes faces criticism for being a price-weighted index, rather than the more popular cap-weighted variant. This means that the benchmark’s movements are impacted more greatly by companies with a bigger stock price, rather than those with a bigger market capitalisation.
Despite this flaw, DIA could be a good fit for investors seeking broad equity exposure with a historical link. The fund has an expense ratio of 0.16% and has top holdings of Goldman Sachs ($GS), UnitedHealth ($UNH), and Microsoft.
9. Vanguard Real Estate ETF ($VNQ)
VNQ is an index fund focused on real estate, tracking the MSCI US Investable Market Real Estate 25/50 Index. This index tracks the performance of a broad swathe of Real Estate Investment Trusts (REITs), a type of tax-efficient vehicle often used by real estate management firms.
VNQ’s largest exposure is in healthcare REITs, retail REITs, and industrial REITs. The fund has an expense ratio of 0.13% and could be suitable for an investor who wants to diversify beyond traditional stocks and bonds.
10. iShares iBoxx $ High Yield Corporate Bond ETF ($HYG)
HYG is an ETF tracking the high-yield bond market. Smaller or riskier companies that cannot achieve investment-grade ratings typically issue these bonds. Due to their higher risk, these bonds tend to come with higher yields – hence the name.
This fund tracks the Markit iBoxx USD Liquid High Yield Index, a popular benchmark for the U.S. high-yield market. HYG has a 30-day yield of 6.91% and an expense ratio of 0.49%.
🏛️ Related: What are bonds and do they work?→
Is it a good time to invest in index funds?
Index funds aren’t exactly a market timing instrument. Instead, they’re designed for buy-and-hold investors looking for low-cost exposure to a broad market over many years.
Decades of academic research indicate that passive investing in index funds beats actively managed funds or market timing strategies, especially when fees are taken into account.
In fact, spreading out your investment over time through dollar cost averaging may help reduce risk.
✅ Curious for more on ETFs? See our list of the best U.S. ETFs to invest in.
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What to consider when investing in an index fund?
Investing in an index fund can be a smart move for long-term investors seeking broad market exposure at a low cost. Here are some key factors to consider when evaluating index funds from the U.S. markets:
Index selection | Choose an index that aligns with your investment goals and risk tolerance. Popular equity indexes include the S&P 500 and Russell 2000, while the Bloomberg Aggregate indexes are widely used in fixed income. |
Expense ratio | An index fund's expense ratio is the annual fee charged to investors to cover operating costs. Funds with low expense ratios will reduce your overall investment cost over time. |
Tracking error | Index funds should aim to replicate the performance of their benchmark index as closely as possible. Tracking error measures the deviation of the fund's returns from the index. Choose a fund with a low tracking error to ensure your investment aligns with your expectations. |
Fund size | Larger funds tend to be more stable and have greater liquidity, making it easier to buy or sell shares. If you’re stuck between two similar-seeming index funds, the one with a larger AUM may be a better choice. |
Diversification | Indexes have different levels of diversification. The Dow Jones index, for instance, tracks just 30 companies, while the CRSP US Total Market Index covers almost 4,000. |
Historical performance | Past performance is not a guarantee of future returns, but it can be a useful indicator of a fund's ability to track its benchmark index. |
Managerial stability | Index funds are usually managed passively, meaning they track their benchmark indexes automatically. However, fund management still plays a role in the fund's overall success, so consider the stability and experience of the fund's management team. |
By considering these factors, you can choose an index fund that aligns with your investment goals and risk tolerance at a low cost.
Benefits of investing in index funds
Index funds can offer several benefits for investors, including:
- Low cost: Because they don’t require as much research or oversight, index funds are generally less expensive to run than actively managed funds. As a result, they typically have lower fees and expenses.
- Passive management: Index funds are designed to track a particular index, so there is no need for active management. Academic evidence suggests that in public markets, active managers do not add sufficient value to justify their high expenses.
- Transparency: Index funds are highly transparent, meaning that investors can evaluate both the fund’s holdings and its performance. Moreover, index funds often publish their rebalancing schedules and communicate any anticipated index adjustments.
Index funds are a low-cost, diversified, and passive way to invest in the stock market. Not only do they offer the potential for strong long-term returns, but they can also minimise the risks associated with individual stock selection.
U.S. Index Funds FAQs
Index funds can potentially be a good investment, but it depends on a number of factors.
On the positive side, index funds are a low-cost way to access broadly diversified market exposure. By combining different index funds covering distinct asset classes, investors can assemble a robust, long-term portfolio.
The performance of index funds is only as good as the performance of the underlying assets. If bonds have a terrible year, then bond index funds are unlikely to perform well – despite their beneficial qualities over actively managed funds. As a result, while index funds can be a valuable tool, whether or not they are a ‘good investment’ depends on how markets perform.
Index funds are popular with investors as an easy, low-cost way to access broad market exposure. Index funds are typically competitive with higher-cost actively managed funds on a performance basis. As a result, index funds have become a common tool among buy-and-hold investors looking for long-term investment appreciation.
Mutual funds and exchange-traded funds (ETFs) are both investment vehicles capable of housing an index fund. However, these vehicles come with a number of key differences:
- Minimum investment: Mutual funds often have a minimum investment requirement, while the minimum ETF purchase is typically just a single share (or even a fractional share).
- Tax efficiency: ETFs are generally more tax efficient than mutual funds, as they use in-kind redemptions to minimise capital gains taxes.
- Liquidity: ETFs can be traded throughout the day as long as markets are open, while mutual funds can only be bought and sold at the end of each trading day. As a result, ETFs offer investors better liquidity.
Index mutual funds and index ETFs provide investors with access to a diversified portfolio of securities that track a particular market or sector. Due to their tax efficiency and liquidity benefits, however, ETFs are rapidly growing in popularity, with total assets set to overtake mutual funds in the coming years.
Disclaimer
The information contained above does not constitute financial product advice nor a recommendation to invest in any of the securities listed. Past performance is not a reliable indicator of future performance. When you invest, your capital is at risk. You should consider your own investment objectives, financial situation and particular needs. The value of your investments can go down as well as up and you may receive back less than your original investment. As always, do your own research and consider seeking appropriate financial advice before investing.
Any advice provided by Stake is of general nature only and does not take into account your specific circumstances. Trading and volume data from the Stake investing platform is for reference purposes only, the investment choices of others may not be appropriate for your needs and is not a reliable indicator of performance.
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