The 5 BEST Index Funds That Will Make You RICH

What's up you guys? It's Graham here. So, we're gonna play a really quick game. Just put up five fingers, and if all five fingers are still up by the time that we're done, then you could watch the whole video. And if not, sorry, you gotta leave. I don't make the rules. I just—wait, wait a second, I do make the rules! So let's begin!

So we'll start like this: put up five fingers. Put a finger down if you don't like making money. Put a finger down if you don't like saving time. Put a finger down if you don't like free things. Put a finger down if you don't like watching YouTube videos. And put a finger down if you don't smash that like button for the YouTube algorithm. Okay, I may have gotten carried away with that last one, but if you still have all five fingers up, congratulations! You've qualified to watch this video to the very end. Because we're going to be covering a topic that I have yet to cover like this before on the channel, and that's going to be a review of my top five favorite index funds that you could buy today to make the most amount of money as possible in the least amount of time.

Now I've covered index fund investing before in the past in terms of what it is and why it could be so profitable. But for anybody new or anyone who wants to brush up on their index fund skills, here's what it is: An index fund is basically just like this big basket of stocks that you could buy into. And when you do that, you want a small portion of everything. It's kind of like going to a cookie store where they have a hundred different types of cookies, each selling for one dollar a piece. At that price, it gets expensive to taste test every single type of cookie so you can find the best ones.

So instead, the cookie store has another option: they have a 20-sample box that contains a small piece of all 100 different cookies. That way, you're getting a little bit of everything for way less than it would cost you to buy them each individually. Or it's kind of like those small cereal packs your grandma always seems to buy in the cupboard. Well, the same sort of concept works for index funds as well. Instead of going to the stock store and buying each stock individually, you could just go and buy an index fund that contains a small portion of everything.

The advantage of doing this is that index fund investing has outperformed 99% of active investors over a 20-year period. And also with this, there's very little work; you don't need to read earnings reports or research stocks. All you gotta do is just buy into it consistently, and that's it! And with index funds, there's a sample platter for anything you could possibly imagine.

I know I'm going to sound like Bubba from Forrest Gump here, but they got index funds for everything! They got the S&P 500 index fund, the total stock market index fund, real estate index funds, bond index funds, mid-cap index funds, small-cap index funds, large-cap index funds. I could go on forever! Generally, though, there are four different types of index funds that you could buy into.

First is company size: you could buy index funds of small companies, mid-tier companies, or large companies. Second, you also have index funds that capitalize on location like the United States, emerging markets, or foreign markets. Third, some other index funds might track a specific business or sector like retail, restaurant space, real estate, tech, industrial, and so on. And fourth, they can also track currencies, bonds, and treasuries. So no matter who you are, what you want to invest in, almost guaranteed there's some type of index fund you could invest in.

So here we go! Here’s my top five index funds to invest in, and I'll break down exactly why they're so good, how much they cost, and how you could get started. Because even though it might seem like a pretty simple concept, not all index funds are created equal, and some will end up making you more money than others. Just make sure if you appreciate these videos to smash that like button for the YouTube algorithm because otherwise, I'm gonna be sad. And if you don't want me to be sad, just press the button! That's it! It helps me out tremendously.

So with that said, thank you so much, and we'll begin right over here at my desk.

So coming in at number five on the list is an all-time favorite and classic of ours: it's VPHIX. This one is a Vanguard index fund that tracks the S&P 500, which is the top 500 publicly traded companies here in the United States. Buying into this one index fund is basically the equivalent of you buying into the largest 500 companies in the U.S., and you're going to get access to all the big wigs like Amazon, Apple, Microsoft, Google, Facebook, and so on.

Now, in terms of its performance, it's on par with the S&P 500 as a whole, but as we can see right here, since the inception in 2000, over the last 20 years it's averaged a 6.38% return, and over the last 10 years, we've seen a 13.95% return. Now, if this seems like the perfect index fund and you're wondering, "But Graham, why is this one number five on the list? It sounds really good, why is it number five?" Well, that's because as much as I love this index fund, there are a few very, very minor downsides, if you even want to call them downsides.

Here are the downsides: first, there is a three thousand dollar minimum to buy into this fund. So if you're watching this without three thousand dollars to invest, this fund is not going to work for you. Now, there is an exchange-traded fund called VOO without any minimum, though, so that trades more like a stock, and that one is really good.

And second, VPHIX also has an expense ratio of 0.04%, meaning it's gonna cost you four dollars every year for every ten thousand dollars you have invested. Now, it's hard for me to even call this a downside, because honestly, compared with 99% of index funds out there, 0.04% is really, really low. But as you're about to see, there are some slightly more cost-effective options out there. Although, in the big picture, the difference of a few dollars a year per ten thousand dollars you have invested is not going to make that big of a difference.

And the advantage with Vanguard is that they're basically the pioneer of low-cost index funds, and that company has been around for a very, very long time. This fund was also founded in 1976 and is one of the longest-running index funds out there, so you're getting the best of the best. Even though they're not necessarily the cheapest, this is like the big daddy of index funds.

Oh, and if you're wondering, the only difference between VPHIX and VOO is that VOO has a slightly lower expense ratio at only 0.03%. But they don't allow for automatic scheduled investments like you could do with VPHIX. So if you're the type of investor who just wants to automatically apply an extra thousand dollars a month into an index fund without even thinking about it, VPHIX is gonna charge you an extra one dollar per ten thousand just for the convenience of doing so. But really, besides that, that's it.

Next, coming in at number four, we got the behemoth of index funds, and for probably most of you, this could be the only investment you ever make in your entire life. It's that good, and that would be the classic VTSAX. Now, what makes this one so unique is that this encompasses the entire U.S. stock market in one fund. Like pretty much, this is everything! If there's a small cap, medium cap, or large cap stock in pretty much any industry you could think of, this index fund probably covers it.

And for one low price, you could get exposure to 3,529 different stocks. Sure, of course, there's always a chance that the S&P 500 might end up doing better, but there's always a chance too that it won't. So the safe play is just to invest in everything with the expectation that over time the market is going to continue to grow and expand. And even if some don't do well, you're still going to have over 3,000 other companies to step in and pick up the base.

Now, of course, I'm sure you're probably thinking right now, "What's the catch, Graham? If you think this one is so good, we should buy it! Why is it only number four?" Well, great question, Graham. And that's because there's a few small minor, minor downsides. First, no surprise, there is a three thousand dollar minimum. Now, if you want to get around this, you could buy the ETF version of the same fund, it's VTI. That's pretty much the same thing with no minimums as long as you have enough to buy the stock. But unfortunately, you cannot automatically reinvest like you can with VTSAX, so it's really just a little bit more work on your end to manually go in and buy more anytime you want to add on to your position.

And second, just like the last option, there is a 0.04% expense ratio with VTSAX, and there's a 0.03% expense ratio with VTI. Again, this is still insanely cheap compared to 99% of the index funds out there, but still, there are some better options like this one.

Now coming in at number three, we got the Charles Schwab S&P 500 index fund, SWPPX. This index was started in 1997 and also follows the S&P 500, very similar to VPHIX which I had previously mentioned. Except with this, there's a few small differences. First, this one has no minimum, so there's no three thousand dollar buy-in. And as long as you have a little money, there you go, you could buy it. This one is easy!

Now, the second difference is that this one only has a 0.02% management fee, which is half of what Vanguard is. Or in other words, you're saving two dollars per year per ten thousand dollars you have invested. But hey, if you have a million dollars invested, that's a savings of two hundred dollars a year in management fees, and that extra money could buy you two hundred-dollar bills.

Now, here's the thing: when it comes to index funds, they mirror an index like the S&P 500, and they do their best to replicate that as close as they can. Although they're never going to be exact, that's why you're going to be seeing some slight differences in between how much each index fund makes. Like Vanguard earned an annualized 13.95% return over ten years, while Schwab made 13.9%. However, Charles Schwab has a slightly lower expense ratio, saving you more money. And now, it looks like they've been getting slightly more efficient over time, because recently their funds have been outperforming Vanguard by 0.3%.

This difference is caused by overhead expenses and slight deviations and holdings between the different funds. It's not a huge deal, but I just wanted to point it out because why not? Now, I also want to throw in a two and a half on this list too, because now is the time to do that, and that would be SCHA, which is Charles Schwab's version of the total stock market index. This one is very similar to the Vanguard one, which tracks the entire U.S. stock market, and this one holds 3,124 different stocks.

There you go! There's another option for anyone who wants to go into VTSAX but doesn't like the higher expense ratio and doesn't like the three thousand dollar minimum. Either way, this index fund is a really good option, but still we have some other really great options as well. And that brings us to this one, and that would be FSKAX. I wish they would just call these normal names that are easy to say and pronounce. Like, just call it F500, just something easy!

Anyway, this is Fidelity's version of the S&P 500 index fund, and lately, they've been playing a pretty aggressive marketing approach to try to reach a brand new audience. Here's the thing: most of these brokerages realize that millennials are soon one day going to be the ones running things. And even though they don't have a lot of money right now, in a few decades they will. And every brokerage wants to cash in on this. That's why they've recently revamped their entire business model and done something that very few brokerages have done so far for index funds: they've lowered fees!

Now keep in mind these fees are actually more like operating expenses because it costs money to manage a fund like this. But I think Fidelity's strategy is that they'll just eat the costs, they'll pass those savings on to you, they'll get you as a customer, and they hope that you stick around long term long enough for them to eventually make money from you. So this index fund has a 0.015% expense ratio. That is 25% lower than Charles Schwab, and it has no investment minimum.

Now sure, it might only be a savings of fifty cents per year per ten thousand you have invested, but every penny counts, and this is a really solid choice. They also have an honorary number one and a half on this list, and that would be FZILX, which is an international stock market index fund. This is, in my opinion, a good fund for most people to get into because it covers foreign and emerging markets that could end up doing really well over the next few decades.

Now it is true that historically the S&P 500 has done way better than international stocks have, but that might not always be the case for the future, especially as other markets begin ramping up production and consumption. It also gives you a little bit more diversification outside the United States just in case. I don't know, the benefits here is that there are no minimums, and even better—wait for it—they have a zero percent expense ratio. That's right! So this one costs you nothing to hold.

But wait! If you thought that was good, just check this out: Webull has a totally new promotion right now where if you sign up and deposit a hundred dollars, they're gonna be giving you one free stock worth at minimum eight dollars and as much as one thousand six hundred dollars. I figure, why not? Because it's free! The link is down below in the description. Thank you so much.

Alright, and now my number one choice for index funds, all things considered, would be the Fidelity Totally Free Stock Market Index, FZROX. Like I mentioned earlier, with Vanguard's VTSAX, Fidelity's FZROX pretty much covers the exact same thing. Except here's the thing: unlike Vanguard, which has a three thousand dollar minimum, FZROX has no minimum. And here's the other thing: unlike Vanguard, which has a 0.04% expense ratio, FZROX has no expense ratio!

That's right, it is entirely free! Now, this was a major game-changer for the entire index fund industry because Fidelity was the first one to come out with a totally free index fund. And I really think this is going to set the stage for everyone else to follow. Like, as it stands right now, a company like Vanguard does not need to go chasing after the free index fund market because a company like Vanguard has brand recognition and loyalty behind them. Plus, when you invest with Vanguard, you know 100% you're getting a very solid company.

But for Fidelity to go and attract a brand new audience to their platform, they lowered their fees on certain index funds to nothing. And they hope that's going to be enough to get you to buy in. And I'll admit, I love Vanguard, but once you start getting more and more and more money, that expense ratio begins to add up. Like, Fidelity is going to save you four hundred dollars a year per one million dollars that you have invested, and that four hundred dollars a year is worth potentially twenty-one thousand dollars in twenty years from now, invested at an eight percent return.

We're also going to have to throw in one more here, FNILX, which is Fidelity's free version of the S&P 500 index fund. Apparently, they can't just call this an S&P 500 index because that means they would have to license that name, and that costs money. But hey, they could call it whatever they want as long as they pass the savings on to the customer. With this one, you're going to get the same S&P 500 index fund except with no fees and no minimum.

So there you go, there's a win for this! So between everything I just mentioned, you should be able to find the perfect index fund to invest in. Index funds within Vanguard certainly have the brand recognition and name behind it, but others like Charles Schwab and Fidelity are cutting their fees to get you to move over to them instead. Either way, it's good for you because now you get to save some more money.

And when it comes to me personally, I like to invest in a mix between all of them. Most of my money is held within an S&P 500 index fund, but I also diversify a little bit more with the total stock market index fund and also an international stock market index fund. So really, sticking between the main index funds of S&P 500 and the total stock market index fund should really be all you need.

Seriously, if all you did was just buy into a total stock market index fund and then wait 20 years, you would have outperformed most active hedge fund managers, and you would put yourself in the best financial position possible to make the most amount of money. Investing does not need to be complicated, and it doesn't need to be expensive either. All of these are great index funds for you to invest in, and all of it's just about maximizing the value of the dollar and getting your free stock down below in the description, and smashing that like button for the YouTube algorithm.

So with that said, thank you so much for watching! I really appreciate it! Make sure to hit the subscribe button and the notification bell. Also, feel free to add me on Instagram—I posted pretty much daily, so if you want to be a part of it there, feel free to add me there. As in my second channel, The Graham Stephan Show, I post there every single day I'm not posting here. So if you want to see a brand new video from me every single day, make sure to add yourself to that.

And lastly, like I mentioned, if you want your free stock down below in the description, it's a free minimum of eight dollars all the way up to one thousand six hundred dollars, and all you gotta do for that is just deposit a hundred bucks. There you go! You got your free stock! Let me know which one you get! Thank you so much for watching, and until next time.