Low-cost index fund investing is the strategy of building a diversified portfolio using passively managed funds that track market indexes at minimal cost. Decades of academic research and real-world data have established this approach as the most reliable way for individual investors to build long-term wealth.
S&P Dow Jones Indices publishes the SPIVA (S&P Indices Versus Active) scorecard semi-annually, comparing active fund performance against their benchmark indexes. The results are remarkably consistent:
Percentage of U.S. large-cap active funds that underperformed the S&P 500:
This pattern holds across virtually all asset classes and geographies. The longer the measurement period, the worse active management looks.
The single largest determinant of fund performance relative to peers is cost. See Expense Ratios and Their Effect on Compounding for detailed analysis.
Typical expense ratios: | Fund Type | Expense Ratio | |-----------|--------------| | Vanguard Total Stock Market ETF (VTI) | 0.03% | | Average U.S. equity index fund | 0.06% | | Average actively managed U.S. equity fund | 0.66% | | Expensive active funds | 1.00%+ |
On a $500,000 portfolio, the difference between 0.03% and 0.66% is roughly $3,150 per year—money that compounds for you in the index fund and against you in the active fund.
You can assemble an entire, fully diversified portfolio from funds that charge 0.04% or less — among the lowest-cost investment products ever offered to individual investors. A sweeping round of Vanguard fee cuts on February 1, 2026 pushed many flagship funds to 0.03%, and the broad-market funds from Fidelity, Schwab, iShares, and State Street (SPDR) sit right alongside them. Fidelity's ZERO mutual funds charge literally nothing.
The tables below list the major funds at or below the 0.04% threshold, grouped by the role they play in a portfolio. Many strategies are available as both an ETF and a mutual fund; the most common ticker is shown. Expense ratios are as of mid-2026 — always confirm the current figure on the fund provider's site, as these change.
| Fund | Ticker | Expense Ratio |
|---|---|---|
| Fidelity ZERO Total Market Index (mutual fund) | FZROX | 0.00% |
| Fidelity Total Market Index (mutual fund) | FSKAX | 0.015% |
| Vanguard Total Stock Market ETF | VTI | 0.03% |
| iShares Core S&P Total U.S. Stock Market ETF | ITOT | 0.03% |
| Schwab U.S. Broad Market ETF | SCHB | 0.03% |
| Schwab Total Stock Market Index (mutual fund) | SWTSX | 0.03% |
| SPDR Portfolio S&P 1500 Composite ETF | SPTM | 0.03% |
| Fund | Ticker | Expense Ratio |
|---|---|---|
| Fidelity ZERO Large Cap Index (mutual fund) | FNILX | 0.00% |
| Fidelity 500 Index (mutual fund) | FXAIX | 0.015% |
| Schwab S&P 500 Index (mutual fund) | SWPPX | 0.02% |
| SPDR Portfolio S&P 500 ETF | SPLG | 0.02% |
| Vanguard S&P 500 ETF | VOO | 0.03% |
| iShares Core S&P 500 ETF | IVV | 0.03% |
| Vanguard Large-Cap ETF | VV | 0.03% |
| Schwab U.S. Large-Cap ETF | SCHX | 0.03% |
For investors who want to tilt toward growth, value, mid caps, or small caps, these factor and size funds stay within the ultra-low-cost band:
| Fund | Ticker | Expense Ratio |
|---|---|---|
| Vanguard Growth ETF | VUG | 0.04% |
| Vanguard Value ETF | VTV | 0.04% |
| Vanguard Mid-Cap ETF | VO | 0.04% |
| Schwab U.S. Large-Cap Growth ETF | SCHG | 0.04% |
| Schwab U.S. Large-Cap Value ETF | SCHV | 0.04% |
| Schwab U.S. Small-Cap ETF | SCHA | 0.04% |
| iShares Core S&P U.S. Growth ETF | IUSG | 0.04% |
| iShares Core S&P U.S. Value ETF | IUSV | 0.04% |
| Fund | Ticker | Expense Ratio |
|---|---|---|
| Vanguard FTSE Developed Markets ETF | VEA | 0.03% |
| Schwab International Equity ETF | SCHF | 0.03% |
| SPDR Portfolio Developed World ex-US ETF | SPDW | 0.03% |
| iShares Core MSCI International Developed Markets ETF | IDEV | 0.04% |
| Fidelity International Index (mutual fund) | FSPSX | 0.035% |
At the 0.04% threshold you get developed-markets international exposure. Broad funds that also include emerging markets cost slightly more — Vanguard Total International (VXUS) is 0.07% and Vanguard Emerging Markets (VWO) is 0.06% — because emerging-market index funds are inherently more expensive to run. If you want a single fund covering the entire ex-U.S. world, expect to pay a hair above the 0.04% line.
| Fund | Ticker | Expense Ratio |
|---|---|---|
| Fidelity U.S. Bond Index (mutual fund) | FXNAX | 0.025% |
| Vanguard Total Bond Market ETF | BND | 0.03% |
| iShares Core U.S. Aggregate Bond ETF | AGG | 0.03% |
| Schwab U.S. Aggregate Bond ETF | SCHZ | 0.03% |
| Vanguard Tax-Exempt Bond ETF (municipal) | VTEB | 0.03% |
A few widely held funds fall just outside the 0.04% cutoff. They are still inexpensive and worth knowing — but recognize that you are paying for something beyond plain broad-market indexing:
The all-in-one funds charge a little more because they bundle automatic rebalancing and — for Target Retirement — an allocation that grows more conservative as you age. For many investors that convenience is well worth a few extra basis points.
When two funds track the same index, they hold nearly identical stocks — so the decision comes down to a short checklist:
For most investors, the "best" low-cost index fund is simply the cheapest total-market or S&P 500 fund offered natively by their existing broker.
The classic three-fund portfolio provides broad global diversification:
Adjust allocations based on your risk tolerance and time horizon. A 30-year-old might use 70/20/10, while a 60-year-old might use 40/20/40.
This three-fund portfolio holds:
You own a slice of essentially the entire investable world. No additional funds, sectors, or asset classes are needed for diversification.
The same index can be accessed through mutual fund or ETF share classes:
| Feature | Index Mutual Fund | ETF |
|---|---|---|
| Trading | End of day NAV | Intraday |
| Minimum investment | $1,000–$3,000 typically | Price of 1 share |
| Fractional shares | Yes (dollar amounts) | Broker dependent |
| Automatic investing | Easy to automate | Harder to automate |
| Tax efficiency | Good | Slightly better |
For buy-and-hold investors in tax-advantaged accounts, there is no meaningful difference. In taxable accounts, ETFs have a slight tax efficiency edge due to their creation/redemption mechanism.
For more on building your portfolio, see Index Fund Portfolio Construction. For understanding how costs impact your returns, see Expense Ratios and Their Effect on Compounding.
What are the cheapest low-cost index funds in 2026? Several broad-market funds charge 0.03% or less, and Fidelity's ZERO funds (FZROX, FNILX) charge 0.00%. Among ETFs, SPLG (0.02%), VOO, VTI, IVV, SCHB, and ITOT (all 0.03%) are among the cheapest — see the tables above for the full list.
What is a good expense ratio for an index fund? Anything at or below 0.10% is excellent, and the broadest core funds now charge 0.00%–0.04%. By comparison, the average actively managed U.S. equity fund charges about 0.66%.
Are low-cost index funds better than actively managed funds? Over long horizons, yes for most investors: SPIVA data shows roughly 90% of active U.S. large-cap funds underperform the S&P 500 over 15 years, largely because of higher costs.
How many index funds do I need? A complete, globally diversified portfolio can be built from just three: a U.S. total-market fund, an international fund, and a U.S. bond fund. A single target-date fund can replace all three for hands-off investors.
ETF or mutual fund — which is the cheaper way to own an index? At the same expense ratio there's little difference for buy-and-hold investors. ETFs trade intraday and are slightly more tax-efficient in taxable accounts; index mutual funds are easier to automate. See Mutual Fund vs. ETF Comparison.