The top index funds in 2022 are those with three key aspects:
- Low cost ratio
- Very diverse
- Lasting through the “test of time”
However, not all index funds are diversified enough to be the top.
Others may not be ideal for long-term investing.
Since there are many types of funds to choose from, it is important for potential investors to understand which index fund can best meet their needs.
This is especially true as we enter the uncertainty that 2022 brings.
Recently, many ETFs (swap funds) and index funds have been put on the market.
However, don’t be fooled by the idea that all ETFs and index funds are great long-term investments.
Many of these funds focus on a narrow niche of industries, including options like streaming media, MLP, or biotechnology.
These funds have a very limited concentration.
They can provide the potential to profit on a large scale in less time.
However, they could also suffer a severe drop if the industry is affected.
Additionally, these funds will tend to have higher expense ratios than broader index funds.
The best index funds in 2022 are those that are inexpensive and widely diversified.
For this reason, we’ve compiled some of the best index funds for 2022 to buy for long-term investing and holding purposes.
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The strongest S&P 500-based index fund for 2022
The S&P 500 index is the gold standard of funding centers. They are an index of 500 stocks of some of the largest companies in the United States by market capitalization and are an excellent indicator of overall market performance. The three best S&P 500-based index funds are VFINX, FXAIX, and SWPPX.
VFINX is the old man. VFINX is the first index fund made available to the public. It introduced the concept of Jack Bogle, founder of Vanguard Investments. Bogle has researched the markets and found that many investors and portfolio managers fail to outperform the average for the markets over the long term. This is especially true when factoring in fund management expenses.
VFIAX has now taken over VFINX and has the same minimum investment size as VFINX, except for a fraction of the price.
Through the simple purchase of low-cost mutual funds (a small number of stocks found in an index), it has been found that investors can instead achieve reasonable returns. This, the Vanguard 500 Index was born.
Cost ratio: 0.04% | Minimum investment: $3,000; Cost ratio: 0.10% | Minimum investment: $10,000
FXAIX: Fidelity Spartan 500 . Index Fund
Fidelity’s level of experience, market size, and ability to compete with Vanguard benefit this index fund. In our opinion, FXAIX is the second best index fund for 2021. Typically, index funds among major competitors are indistinguishable in terms of performance and cost.
Essentially, the competitive nature of FXAIX compared to VFINX creates the development of much higher quality funding for investors. FXAIX and VFINX hold identical shares. However, these stocks have lower expense ratios and lower minimum initial investment (entry points).
Cost ratio: 0.02% | Minimum investment: $0
SWPPX: Schwab S&P 500 Index Fund
Charles Schwab has long made a strong effort to provide users with a much higher than standardized discount brokerage service for their investors. Instead, they recently entered the S&P 500 index fund market, poised to take on the likes of Fidelity and Vanguard.
They’ve recently reduced their costs to beat Fidelity a bit, and with a much lower minimum initial investment, the fund is available to almost anyone looking to enter the market for index funds. on the S&P 500 in 2021.
Cost ratio: 0.02% | Minimum investment: $0
The strongest total market-based index fund for 2022
Sometimes, exposure to more than five hundred large-cap US stocks isn’t a level of diversity for some people. In those cases, total stock market funds are available. These funds invest in thousands of stocks, including a tight mix of large caps, small caps, and mid caps. Vanguard and Schwab have cornered the market into a Stock Market index fund for 2022.
VTSAX: Vanguard Total Stock Market Index Fund
The Vanguard Total Stock Market Index is the largest mutual fund on earth. It got to this point for a good reason. Vanguard essentially invented the concept of an index fund, and VTSAX was among the original index funds that took over the entire stock market.
With costs low enough to reduce Vanguard’s normally high expense ratio to 0.04%, the Vanguard Total Stock Market Index makes a great 2022 index fund for those looking for a good bet. A safe bet and a great core fund for any diversified portfolio of mutual funds.
Cost ratio: 0.04% | Minimum investment: $3,000
SWTSX: Schwab Total Stock Market Index Fund
The Schwab Total Stock Market Index, or SWTSX, has a very low expense ratio of 0.03%. This is a great index fund based on the total market and is hard to beat, at least at the $0 minimum investment.
Like many other Schwab funds, their minimum purchase is extremely low and is one of the most affordable on our list, with a minimum investment of $0.
Cost ratio: 0.03% | Minimum investment: $0
Strongest Aggression Index Fund for 2022
If you see yourself as a long-term investor, you probably don’t worry about occasional market swings. In the short term, this means your balance will go up and down. If you don’t mind this and are fine looking long-term, some of these aggressive index funds may be a better fit for you. These are typically higher-reward, higher-risk index funds.
VIGAX: Vanguard Growth Index Fund
The Vanguard Growth Index Fund invests in larger market cap (large cap) stocks that show strong growth potential. This makes investing there a bit riskier than the index funds above. However, this can also be much more rewarding in the long run than S&P 500-based funds.
VIGAX has an average expense ratio when compared to other active funds we are reviewing.
Cost ratio: 0.05% | Minimum investment: $3,000
FNCMX: NASDAQ Fidelity Composite Index Fund
This Fidelity index fund is primarily comprised of large-cap stocks. However, many of these stocks are based in the health and technology sectors. These stocks tend to have stronger growth potential over the long term when compared to the broader markets.
For this reason, if you’re not turned off by the idea of some added risk in return for the potential for additional returns, in the long run the Fidelity NASDAQ Composite fund is a great index fund to invest in. 2021. Their expense ratio is on the higher side, at 0.29 percent, but the minimum investment is lower than that of Vanguard alternatives, at $2,500.
Cost ratio: 0.3% | Minimum investment: $0
VIMAX: Vanguard Average Index Fund
Mid-cap stocks are a great alternative to large-cap stocks. They are a great option to potentially beat the strong S&P 500. These stocks have historically outperformed larger market cap stocks, but don’t pose as significant risk as small cap stocks. These make VIMAX a great mid-range index fund to buy. They are in a favorable position when the return is certain but the risk is not too high.
Their expense ratios are also lower than those of the two active funds above. However, like the other Vanguard funds on our list, they have a higher minimum buy.
Cost ratio: 0.05% | Minimum investment: $3,000
The strongest bond-focused index funds for 2022
Bond-based indexed funds are much more suitable for the everyday investor. Many people with diversified portfolios of index funds and mutual funds use these fund options. They are a great vehicle for capturing the majority of the bond market with a low-stress, low-fee investment.
The total bond market index is usually a reference to index-based mutual funds or ETFs (exchange-traded funds). These funds invest in BarCap Aggregate, or Barclay’s Aggregate Bond Index. This is a broader bond index that includes most bonds traded on U.S. indices, as well as some foreign bonds traded within the United States.
Having more bond-based index funds in 2022 will exceed the need for simplicity and diversity. Two of the most powerful are VBMFX and FTBFX.
VBMFX: Vanguard Total Bond Market Index
The Vanguard Total Bond Market Index is the largest bond-focused index fund in existence (relative to assets under management). This means it’s one of the all-time favorites for self-invested buyers and fee-only advisory services. When buying into the VBMFX index, the buyer is exposed to the full US bond market. This includes thousands of bonds in a variety of categories, including:
- US Treasuries
- Corporate bonds
- Short-term, medium-term and long-term bonds
Cost ratio: 0.15% | Minimum Investment: Not applicable for new investors
FTBFX: Total Honesty Bond Index
The Fidelity Total Bond Index is a great index fund to buy right now, and is very similar to the Vanguard option above. In addition, FTBFX is highly flexible and can strike a good balance between reward and risk. It can hold more bonds with higher yields and is likely to earn much higher returns in the long term because of this, when compared to VBMFX.
However, this results in a much higher expense ratio than most of the funds on our list, at 0.45%. However, the additional costs for an index fund can be more than it’s worth.
Cost ratio: 0.45% | Minimum investment: $0
Putting it all together: Best index funds for 2022
Some of the strongest and highest yielding index funds have been our top picks for 2021. These best buy-and-hold index funds have lower expense ratios than alternative funds, are diverse and proven to last through volatile markets.
Read more: Learn how to invest for beginners
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