10 Top U.S. Index Funds to Watch in 2023

Which U.S. index fund has the highest return?

The best performance of the last 10 years among index funds has been the SPDR S&P Semiconductor ETF ($XSD). Between January 2013 and April 2023, $XSD has delivered a staggering return of over +700% to its investors, surpassing the performance of other non-leveraged ETFs. The fund primarily invests in companies that operate in the semiconductor industry, encompassing the design, manufacture, and distribution of integrated circuits and other electronic components. $XSD offers exposure to a diverse range of domestic and international semiconductor firms across various market capitalisations.

Investing in the SPDR S&P Semiconductor ETF ($XSD) provides several advantages, including exposure to a fast-growing industry with a high potential for growth and diversification across multiple companies. However, it's worth noting that the semiconductor industry is known for its volatile nature due to its cyclical characteristics. Additionally, the ETF is subject to concentration risk, as its top holdings account for a significant portion of its overall portfolio.

Top 10 U.S. index funds to watch

Data as of 20 April 2023.

Discover the top U.S. index fund ETFs on Wall St

1. Vanguard U.S. Total Stock Market Index ($VTI)

Market capitalisation: US$167.64b

Stock price (as of 20/04/2023): US$204.82

Stake platform bought / sold (1 Jan 2023 - 20 Apr 2023): 79% / 21%

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. It holds over 3,600 individual stocks and has a low expense ratio of just 0.14%. It is widely regarded as one of the best index funds available due to its broad diversification, low cost, and strong long-term performance.

🆚 Compare VTI vs SPY stock comparison→

2. S&P 500 ETF Trust SPDR ($SPY)

Market capitalisation: US$371.76b

Stock price (as of 20/04/2023): US$411.88

Stake platform bought / sold (1 Jan 2023 - 20 Apr 2023): 68% / 32%

The S&P 500 ETF Trust SPDR index fund tracks the performance of the S&P 500 index, which is made up of 500 large-cap U.S. stocks. It is one of the most widely traded ETFs and is often used as a benchmark for the U.S. stock market. It has an expense ratio of 0.09% and is a popular choice for investors looking for exposure to large-cap U.S. stocks.

🆚 Compare SPY vs IVV stock comparison→

3. iShares Core S&P 500 ETF ($IVV)

Market capitalisation: US$310.08b

Stock price (as of 20/04/2023): US$413.66

Stake platform bought / sold (1 Jan 2023 - 20 Apr 2023): 80% / 20%

The iShares Core S&P 500 ETF index fund also tracks the performance of the S&P 500 index, but has a lower expense ratio of just 0.03% compared to $SPY. It holds the same 500 stocks as SPY and is a popular choice for investors looking for low-cost exposure to large-cap U.S. stocks.

🆚 Compare IVV vs VTI stock comparison→

4. Vanguard US Total Bond Market Index ETF ($BND)

Market capitalisation: US$91.29b

Stock price (as of 20/04/2023): US$73.61

Stake platform bought / sold (1 Jan 2023 - 20 Apr 2023): 73% / 27%

The Vanguard US Total Bond Market Index ETF tracks the performance of the entire U.S. bond market, including government, corporate, and municipal bonds. It holds over 8,000 individual bonds and has a low expense ratio of just 0.05%. It is a popular choice for investors looking for exposure to the fixed-income market.

5. iShares Russell 2000 ETF ($IWM)

Market capitalisation: US$49.81b

Stock price (as of 20/04/2023): US$177.33

Stake platform bought / sold (1 Jan 2023 - 20 Apr 2023): 59% / 41%

The iShares Russell 2000 index fund tracks the performance of the Russell 2000 index, which is made up of small-cap U.S. stocks. It holds over 2,000 individual stocks and has an expense ratio of 0.19%. It is often used as a benchmark for the small-cap stock market.

6. Schwab U.S. Broad Market ETF ($SCHB)

Market capitalisation: US$21.48b

Stock price (as of 20/04/2023): US$48.03

Stake platform bought / sold (1 Jan 2023 - 20 Apr 2023): Not available

The Schwab U.S. Broad Market ETF tracks the performance of the entire U.S. stock market, including small, mid, and large-cap stocks. It holds over 2,500 individual stocks and has a low expense ratio of just 0.03%. It is a popular choice for investors looking for broad exposure to the stock market.

7. Vanguard FTSE All-World ex-US ETF ($VEU)

Market capitalisation: US$35.32b

Stock price (as of 20/04/2023): US$54.43

Stake platform bought / sold (1 Jan 2023 - 20 Apr 2023): 82% / 18%

The Vanguard FTSE All-World ex-US ETF index tracks the performance of international stocks, excluding U.S. stocks. It holds over 3,500 individual stocks across developed and emerging markets outside of the U.S. It has a low expense ratio of just 0.08% and is a popular choice for investors looking for exposure to international developed and emerging markets.

8. iShares MSCI EAFE ETF ($EFA)

Market capitalisation: US$49.87b

Stock price (as of 20/04/2023): US$73.26

Stake platform bought / sold (1 Jan 2023 - 20 Apr 2023): 57% / 43%

The iShares MSCI EAFE ETF tracks the performance of developed market stocks in Europe, Asia, and Australia. It holds over 900 individual stocks and has an expense ratio of 0.32%. It is often used as a benchmark for international developed markets.

9. Vanguard FTSE Emerging Markets Index ETF ($VWO)

Market capitalisation: US$60.60b

Stock price (as of 20/04/2023): US$40.33

Stake platform bought / sold (1 Jan 2023 - 20 Apr 2023): 79% / 21%

The Vanguard FTSE Emerging Markets Index ETF tracks the performance of emerging market stocks in countries such as China, Taiwan, Brazil, and South Africa. It holds over 5,000 individual stocks and has a low expense ratio of just 0.10%. It provides investors with exposure to the fast-growing economies of these countries.

10. iShares MSCI ACWI ETF ($ACWI)

Market capitalisation: US$18.84b

Stock price (as of 20/04/2023): US$92.11

Stake platform bought / sold (1 Jan 2023 - 20 Apr 2023): Not available

The iShares MSCI ACWI index fund seeks to track the performance of the MSCI All-Country World Index. This index is designed to capture the performance of both developed and emerging market equities across 23 developed markets and 27 emerging markets. The ACWI ETF offers exposure to a wide range of companies across multiple sectors and geographies, making it a diversified investment option for investors seeking global equity exposure. The ETF has a relatively low expense ratio of 0.32%, which is competitive for a global ETF.

What to consider when investing in an index fun?

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 indexes include the S&P 500, Nasdaq Composite, and Russell 2000.
• Expense ratio: An index fund's expense ratio is the annual fee charged to investors to cover operating costs. Look for funds with low expense ratios, as they will reduce your investment's overall cost.
• Tracking error: Index funds should aim to replicate the performance of their benchmark index as closely as possible. The tracking error measures the deviation of the fund's returns from the index. Choose a fund with a low tracking error.
• Fund size: Larger funds tend to be more stable and have greater liquidity, making it easier to buy or sell shares. However, they may also be subject to greater trading costs.
• Diversification: Look for a fund that provides diversification across different sectors and industries, reducing the risk of concentration in any one area.
• 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, while minimising fees and maximising returns over other funds.

Benefits of investing in index funds

Index funds offer several benefits for investors, which include:

• Low cost: Index funds are generally less expensive than actively managed funds because they don't require as much research or oversight. As a result, they typically have lower fees and expenses.
• Diversification: Index funds invest in a basket of stocks or other securities that represent a particular market or sector. This diversification helps spread the risk of investment and can reduce the impact of individual company fluctuations on the overall portfolio.
• Passive management: Index funds are designed to track a particular index, so there is no need for active management. This makes them easy to understand and helps eliminate the risk of underperformance due to poor stock picking by a fund manager.
• Performance: While there are no guarantees, index funds generally perform well over the long term. This is because they are designed to capture the performance of the broader market or sector they track, which has historically provided good returns over time.
• Transparency: Index funds are typically transparent, meaning that investors can see exactly what the fund holds and how it is performing. This can help investors make informed decisions about their investments.

Index funds are a low-cost, diversified, and passive way to invest in the stock market. They offer the potential for good returns over the long term while minimising risks associated with individual stock selection.

U.S. Index Funds FAQs

Are index funds a good investment?

Index funds can be a good investment option for a variety of reasons. One of the main benefits of investing in index funds is that they offer broad market exposure, which means that investors can gain exposure to a diverse range of stocks or other securities with a single investment. This diversification can help to reduce the overall risk of an investment portfolio, as it spreads the risk of investing across multiple companies or industries.

Another key advantage of index funds is that they typically have lower expense ratios than actively managed funds. This is because they don't require the same level of expertise or resources as active management, which can involve extensive research and analysis of individual stocks. As a result, index funds are often able to pass on cost savings to investors, which can help to boost overall returns.

Of course, like any investment, index funds do carry some level of risk, and there is no guarantee that they will always provide positive returns. However, by diversifying across a broad range of securities, and by keeping costs low, index funds can be an effective way for investors to build a long-term investment portfolio with minimal effort and risk.

Why are index funds popular with investors?

Index funds are popular with investors since they are typically easy to buy and sell, either through mutual funds or ETFs, which makes them a convenient investment option for both novice and experienced investors. They are also relatively low-maintenance investments, as investors do not need to spend a lot of time monitoring their investments or making frequent trades.

Overall, the combination of broad market exposure, lower costs, convenience, and historically strong performance make index funds a popular and effective investment option for many investors.

What is the difference between an index mutual fund and an index ETF?

The main differences between an index mutual fund and an index ETF (Exchange Traded Fund) are:

• Minimum investment: Index mutual funds typically have a minimum investment requirement, while index ETFs have no minimum investment requirement.
• Cost: Index ETFs generally have lower expense ratios compared to index mutual funds, but they may incur additional costs like brokerage fees and bid-ask spreads when bought or sold.
• Tax efficiency: Index ETFs are generally considered to be more tax efficient than index mutual funds, as they may be able to use in-kind redemptions to minimise capital gains taxes.
• Investment strategy: Index mutual funds are typically designed for long-term buy-and-hold investors, while index ETFs may be more suitable for investors who want to trade frequently or use different investment strategies, such as hedging or short selling.

Both index mutual funds and index ETFs provide investors with access to a diversified portfolio of securities that track a particular market or sector. However, the differences in trading, minimum investment, cost, management fees, tax efficiency, and investment strategy may make one option more suitable than the other depending on an investor's goals and preferences.

This does not constitute financial product advice nor a recommendation to invest in the securities listed. Past performance is not a reliable indicator of future performance. As always, do your own research and consider seeking appropriate financial or taxation advice before investing.