Why Low-Cost Index Funds Are Winning in 2025
If you’re serious about building wealth through the stock market & index funds, the secret isn’t chasing the hottest stock—it’s minimizing costs. In 2025, investors have access to some of the most affordable, diversified, and high-performing index funds ever created.
The magic lies in simplicity. Low-cost index funds quietly compound your money while others chase trends. Let’s explore the top 8 low-cost index funds that can supercharge your long-term returns.
What Are Index Funds?
The Basics of Stock Market & Index Funds
An index fund is a basket of stocks designed to mirror the performance of a specific market index—like the S&P 500. Instead of trying to beat the market, these funds become the market, offering predictable returns with minimal risk.
Why Low-Cost Funds Matter More Than Ever
Every dollar saved in fees is a dollar added to your investment growth. Over decades, lower fees mean thousands more in profits—without lifting a finger.
How Low Fees Improve Long-Term Returns
The Power of Compounding in Stock Market & Index Funds
Imagine earning 8% per year on your investments. Now subtract 1% in fees—that’s a 12.5% drop in your net return! The less you pay, the more your money compounds year after year.
Expense Ratios: The Silent Profit Killer
Expense ratios may look small (like 0.5%), but over 30 years, they can drain tens of thousands from your portfolio. That’s why choosing low-cost index funds is crucial for maximizing long-term wealth.
8 Low-Cost Index Funds for Long-Term Investors
Let’s break down the best low-cost index funds to consider in 2025, ideal for both beginners and seasoned investors aiming for long-term success.
1. Vanguard Total Stock Market Index Fund (VTI)
VTI is one of the most comprehensive funds available, covering the entire U.S. stock market—from small startups to mega-cap corporations.
- Expense Ratio: 0.03%
- Why It’s Great: Offers full market exposure and strong historical returns.
- Perfect For: Investors seeking one fund for everything U.S.-related.
2. Schwab U.S. Broad Market ETF (SCHB)
SCHB gives investors exposure to over 2,500 U.S. companies across all sectors.
- Expense Ratio: 0.03%
- Why It’s Great: Low fees and wide diversification.
- Perfect For: Long-term investors who want solid, steady performance.
3. Fidelity ZERO Total Market Index Fund (FZROX)
The standout feature? Zero fees.
- Expense Ratio: 0.00%
- Why It’s Great: No management fees mean all your earnings stay with you.
- Perfect For: Beginners looking to maximize compounding without paying a cent in fees.
4. iShares Core S&P 500 ETF (IVV)
IVV tracks the S&P 500 and rivals Vanguard’s VOO in both returns and affordability.
- Expense Ratio: 0.03%
- Why It’s Great: Reliable, high-liquidity, and tax-efficient.
- Perfect For: Investors focused on the U.S. large-cap sector.
5. Vanguard S&P 500 ETF (VOO)
VOO is the gold standard in the stock market & index funds world.
- Expense Ratio: 0.03%
- Why It’s Great: Tracks 500 of America’s biggest, most stable companies.
- Perfect For: Hands-off investors seeking long-term, steady growth.
6. Schwab International Equity ETF (SCHF)
SCHF brings international flavor to your portfolio, with exposure to developed markets outside the U.S.
- Expense Ratio: 0.06%
- Why It’s Great: Low-cost access to European and Asian stocks.
- Perfect For: Diversifying beyond U.S. borders.
7. Vanguard Dividend Appreciation ETF (VIG)
VIG focuses on companies that consistently increase dividends—ideal for passive income lovers.
- Expense Ratio: 0.06%
- Why It’s Great: Combines growth and income through dividend reinvestment.
- Perfect For: Investors who value steady cash flow.
8. iShares Core MSCI Total International Stock ETF (IXUS)
IXUS captures global diversification, covering developed and emerging markets worldwide.
- Expense Ratio: 0.07%
- Why It’s Great: Balanced exposure to markets beyond the U.S.
- Perfect For: Building an all-weather international portfolio.
Why These Index Funds Stand Out
Broad Market Exposure
Each of these funds covers a large swath of the market—reducing risk while maintaining consistent returns.
Low Expense Ratios
With expense ratios as low as 0.00%–0.07%, you keep more of your profits where they belong—in your pocket.
Reliable Long-Term Performance
These funds have proven themselves over time, showing resilience through market cycles while outperforming many actively managed funds.
How to Choose the Right Index Fund for Your Goals
Define Your Time Horizon and Risk Tolerance
If you’re young with decades to invest, a total market fund like VTI or FZROX makes sense. Closer to retirement? Dividend or international funds may offer stability and income.
U.S. vs International Exposure
Balancing both U.S. and global funds—like VTI and IXUS—ensures your portfolio stays diversified across economies and industries.
Tips to Maximize Returns with Stock Market & Index Funds
Invest Consistently Through Market Ups and Downs
Market timing rarely works. Consistency beats perfection. Regularly invest, even when markets dip.
Reinvest Dividends Automatically
Reinvesting dividends accelerates compounding—letting your money grow faster without extra effort.
Avoid Frequent Trading
Trading too often increases costs and taxes. Long-term holding is where real wealth builds.
Common Mistakes to Avoid When Investing in Index Funds
Chasing Short-Term Gains
The stock market & index funds strategy is long-term by design. Don’t get distracted by daily price swings.
Ignoring Fund Fees and Taxes
Even small differences in expense ratios can have massive long-term impacts. Always check before investing.
Conclusion: Build Wealth the Smart Way
Low-cost index funds are your best friend for long-term success. They’re simple, diversified, and efficient—everything most investors need to achieve financial freedom.
Whether you choose VTI for total market coverage or FZROX for zero fees, the key is consistency and patience. Remember: in the stock market & index funds game, time—not timing—is your most valuable asset.
FAQs
1. Why are low-cost index funds better for long-term investing?
Because lower fees allow your money to grow faster over time through compounding.
2. How do I start investing in index funds?
Open a brokerage account with Vanguard, Schwab, or Fidelity, and start with a small amount monthly.
3. Are index funds safe investments?
They carry market risk but are generally safer than individual stocks due to broad diversification.
4. What is a good expense ratio for index funds?
Anything under 0.10% is considered excellent for long-term investing.
5. Should I invest in both U.S. and international index funds?
Yes, it helps you diversify and balance risk across global markets.
6. How often should I check my index fund investments?
Once a quarter is enough—index investing works best when you stay patient.
7. Can index funds make me a millionaire?
Absolutely—consistent investing and compounding over 20–30 years can grow modest contributions into seven figures.