Another #MoneyMonday and sharing all things Index Funds! One of the most common questions I get asked is “Once I’ve budgeted and saved some money, what and where should I invest in first?” It’s definitely a FULLY loaded question and one that I can’t simply answer without a few follow up questions like, ‘what’s your risk level on investments?
For first time investors I always like to introduce them to start with index funds. The risk level is low and you easily diversify your portfolio into a large pool of accredited companies. However index funds are definitely for those who are in it for the long run.
Top Index Funds for 2021
Another loaded question. It can be more exciting especially for first time investors if you invest in an index fund that includes companies that you like or in a field of your interest. This approach does not necessarily make you any more money but it can make it more exciting mentally to watch your money grow with companies that you’ve always wanted to invest in. I’m sharing some of the best index funds for 2021 based on extensive research including a variety of investment goals, low expense ratios, and low minimum investment requirements.
1. Fidelity Zero Large Cap Index Fund
Investing in the S&P 500 index funds is almost a guarantee to grow wealth over time. The Fidelity ZERO Large Cap Index Fund ticker symbol FNILX, tracks about 500 of the U.S. large cap stocks and performs similar to the S&P 500 index fund. An added benefit of this index fund is that it avoids paying expensive licensing fees to S&P Global, the index’s parent company. You don’t need a minimum investment amount either which makes this a great choice for first time investors. In 2020 alone the index fund had a return of 20.50%
2. Schwab S&P 500 Index Fund
One of the best S&P Index Funds and with lowest cost in the industry is the Schwab S&P 500 Index Fund, ticker symbol SWPPX. You’ll pay $.20 for every $1,000 you invest into the fund and with annual returns at about 18% and no minimum investment amount this is a GREAT index fund for beginners.
3. Vanguard Growth ETF
Looking for an index fund with a bit more risk as well as higher rewards? Then the Vanguard Growth ETF, ticker symbol VUG is a great choice. This fund invests in over 250 U.S. large cap growth stocks. High in tech stocks and less on energy and utility stocks. You’ll be paying $0.40 for every $1,000 invested on a fund whose annual return is about over 23%.
4. Vanguard Real Estate ETF
If you have some interest in investing in the real estate market, the Vanguard Real Estate ETF, ticker symbol VNQ is a great starting point. Having some of the industry’s lowest cost with an investment cost of about $0.12 for every $1,000 invested. This index fund is also the largest real estate index fund including about $75B assets. However this index fund has performed at about 2.34% thus far this year which isn’t the greatest return rate especially given the others mentioned above and below but again a good introductory index fund if you’re interested in getting into the real estate market.
5. Vanguard Russell 2000 ETF
Many of the above index funds invested in large cap companies however the the Vanguard Russell 2000 ETF, ticker symbol VTWO is a good place for beginner investors who want to invest in small cap companies. Based on data for this year majority of their investments are in healthcare companies and industrial businesses with a total return of 20.2%, out performing the S&P 500.
6. Schwab Emerging Markets Equity ETF
Want to get more exposure to emerging markets with high growth without too much risk? Then I would look more into, the Schwab Emerging Markets Equity ETF, ticker symbol SCHE. It follows FTSE emerging index, a collection of large and mid cap stocks within over 20 developing countries. There is a lot of volatility investing in these markets but if you have long term vision it is not a bad place to watch your money grow. It has underperformed in comparison to the S&P 500 but has shown a lot of growth nonetheless.
There are so many other great funds to invest in to have your money work for you. Always remember to do your research and get the latest market data so you’re equipped with all the knowledge to make the best decision for you. Keep in mind that traditionally index funds have performed very well but there is always a level or risk involved so don’t jump in until you’ve properly budgeted and built up some savings for a rainy day.
<3 Happy Investing