Some popular index funds include the Vanguard S&P 500 ETF (VOO), SPDR S&P 500 Trust (SPY), iShares Core S&P Small-Cap ETF (IJR), Vanguard Total Stock Market ETF (VTI) and Vanguard FTSE Developed Markets ETF (VEA), according to MSN Money and Bloomberg. Kiplinger recommends Vanguard funds due to their low expenses.
Index funds are traded mutual funds that invest in the same components as a market index, such as the S&P 500, according to The Motley Fool. Other well-known stock indices are the Dow Jones Industrial Average and the Nasdaq composite index, according to Reuters. Index funds tend to have higher returns in part because they do not have the high transactional costs of actively managed funds and because their expense ratios are lower than those of actively managed funds, says The Motley Fool.
The SPDR S&P 500 Trust (SPY) is the oldest and most widely traded fund and was established in 1993, according to Bloomberg. However, even index funds that attempt to track the same indices can perform differently. For example, iShares Core S&P 500 ETF (IVV) outperformed SPDR S&P 500 Trust (SPY) for the 10-year period ending in 2013. The difference between the two funds' performances was small but significant, with an iShares investor outearning a SPDR investor by $48 per $10,000 invested over the 10-year period.