A low-cost index fund holds a slice of an entire market at a tiny fee, and the best ones in 2026 are simply the broadest funds with the lowest expense ratios. The short answer: pick a total-market or S&P 500 index fund with an expense ratio well under 0.10 percent, add international and bond funds if you want a complete mix, and ignore the marketing. You do not need a long list of funds; two or three broad ones cover almost everyone. This is general education, not personalized investment advice, so confirm any specific fund fits your goals and timeline.
What makes an index fund low-cost
The single most important number is the expense ratio, the annual fee charged as a percentage of your balance. The difference between 0.03 percent and 0.50 percent sounds trivial but compounds into real money over decades.
| Category |
What it holds |
Typical low expense ratio |
Role in a portfolio |
| Total US market |
Nearly all US stocks |
Around 0.03 to 0.04 percent |
Core holding |
| S&P 500 |
500 large US companies |
Around 0.02 to 0.04 percent |
Core US large cap |
| Total international |
Stocks outside the US |
Around 0.05 to 0.08 percent |
Global diversification |
| Total bond market |
US investment-grade bonds |
Around 0.03 to 0.05 percent |
Stability, lower risk |
| Target-date fund |
A mix that shifts over time |
Around 0.08 to 0.15 percent |
All-in-one simplicity |
Ranges are approximate for 2026 and vary by provider; check the exact figure on the fund page before buying.
How to choose
Keep it simple and follow these steps:
- Pick one core US fund. A total US market or S&P 500 index fund. These overlap heavily, so you do not need both.
- Add international if you want global exposure. A total international index fund covers developed and emerging markets.
- Add bonds for stability as your horizon shortens. A total bond index fund smooths out the ride.
- Or buy a single target-date fund. It bundles all of the above and rebalances automatically; the fee is slightly higher but the simplicity is worth it for many.
- Compare expense ratios head to head. Among broad funds, the cheapest very similar option is usually the right one.
A classic three-fund portfolio, US stocks plus international plus bonds, is enough for most investors for life. If you are choosing what to hold them in, compare the best investment accounts for beginners first.
What to skip
- Skip high-fee themed funds. Sector, country, or trend funds often charge far more for narrower, riskier exposure.
- Skip owning many overlapping funds. A total-market fund and an S&P 500 fund hold mostly the same companies.
- Skip funds with sales loads. A front-end or back-end load is a fee a good index fund does not need.
- Skip chasing last year's top performer. Past returns do not predict future ones, and the fee is forever.
FAQ
What expense ratio counts as low cost in 2026?
For a broad index fund, anything well under 0.10 percent is genuinely low, and core US funds often sit near 0.03 percent.
Should I buy a mutual fund or an ETF version?
Both can be excellent and cheap. ETFs trade like stocks and often have low minimums; mutual fund versions are simpler for automatic investing. The index and fee matter more than the wrapper.
How many index funds do I really need?
One to three for most people. A single total-market or target-date fund can be a complete portfolio on its own.
Do low-cost index funds underperform active funds?
Over long periods, most active funds fail to beat their low-cost index after fees. Low costs are one of the few reliable edges an investor controls.
Where to go next
What are index funds, index fund vs ETF, and how to invest in the S&P 500.