Vanguard 500 Index Fund - Historical Data

Index funds are a special type of financial vehicle that pools money from investors and invests it in securities such as stocks or bonds. An index fund is designed to track the returns of a designated stock market index. A market index is a hypothetical portfolio of securities that represents a segment of the market. For example, the S&P 500 index represents 500 of the largest U.S. companies.

The average annual return for the S&P 500 is close to 10% over the long term. The performance of the S&P 500 index is better in some years than in others, though. In fact, in the past 60 years, the single-year total return (including dividends) of the S&P 500 has been as high as 37.6% or as low as negative 37%, but it averaged an annualized gain of 9.9% over the entire period.

Low-cost index funds are among the most advantageous investment vehicles for those focused on the long term. It's important to know a fund's expense ratio, which denotes how much money in management fees you'll pay before investing your hard-earned dollars. Here are some top low-cost index funds and their expense ratios:

• Vanguard S&P 500 ETF 0.03%
• Vanguard Large-Cap ETF 0.04%
• Schwab U.S. Large-Cap ETF 0.03%
• Vanguard Mid-Cap ETF 0.04%
• Schwab U.S. Mid-Cap ETF 0.04%
• Vanguard Small-Cap ETF 0.05%
• iShares Core S&P Small-Cap ETF 0.06%
• Schwab U.S. Broad Market 0.03%
• iShares Core S&P Total US Stock Market 0.03%
• Vanguard Total Stock Market 0.04%

You can directly invest in index funds by opening and funding a brokerage account. All brokers allow you to directly buy shares of ETFs on the open market, and most allow you to directly invest in mutual funds if you prefer to use those.

The minimum needed depends on the fund and your broker's policies. If your broker allows you to buy fractional shares of stock, you may be able to invest in index fund ETFs with as little as $1. If not, your minimum investment will be the cost of one share of the ETF. Index funds that are mutual funds typically have a minimum initial investment set by the mutual fund provider.

Index funds come in ETF and mutual fund forms, and can be invested in directly through a brokerage account. Alternatively, you can automate your index fund investing by opening an account with a robo-advisor.