How to Invest in Index Funds
The lowest-effort way to own the market, and the handful of details that still matter.
Funds · 6 min read
Why indexing works
An index fund buys the whole benchmark and charges very little to do it. Costs are the one variable in investing that is known in advance, and lower costs compound in your favour.
Most active managers fail to beat their benchmark over a decade once fees are counted.
Back to topPick the benchmark first
A broad US total-market or S&P 500 fund forms the core. Add an international fund for geographic breadth and a bond fund for ballast.
Three funds are usually enough. Extra slices add complexity faster than they add return.
Back to topCheck the details that matter
Compare expense ratio, tracking difference versus the index, and fund size. A cheap fund that tracks poorly is not cheap.
Inside a taxable account, prefer ETF share classes or tax-managed funds to limit distributions.
Back to top