Index funds changed the game for everyday investors – and Jack Bogle, founder of Vanguard, is the reason most of us can access them. Here’s what you need to know.
What Is an Index Fund?
An index fund is a type of investment that tracks a market index – like the S&P 500, which represents the 500 largest U.S. companies.
Instead of picking individual stocks, you’re buying a tiny slice of all 500 companies at once. When the market goes up, your investment goes up. When it dips, yours dips too – but over the long term, the market has always recovered and grown.
The key advantages:
Low fees – index funds have some of the lowest expense ratios available (sometimes as low as 0.03%)
Built-in diversification – you’re spread across hundreds of companies
Passive – no stock-picking, no active management
Historically strong returns – over long periods, most actively managed funds fail to beat the index
That last one is worth pausing on. Most professional fund managers, with all their research and expertise, don’t consistently beat the S&P 500 over 10–20 years. That tells you something.
Index Funds vs. ETFs: What’s the Difference?
You’ll hear both terms a lot. The quick version:
Index funds are bought directly through a fund company (like Vanguard or Fidelity). You buy at the end-of-day price.
ETFs (Exchange-Traded Funds) trade throughout the day like stocks. Many ETFs track the same indexes – like the S&P 500 – just in a different wrapper.
For most beginners, the difference doesn’t matter much. Both are great tools. The important thing is what index the fund tracks and what the fees are.
Popular Index Funds to Know
Here are some well-known options across major platforms:
VOO or VFIAX (Vanguard S&P 500 ETF / fund) – tracks the S&P 500
FXAIX (Fidelity S&P 500 Index Fund) – same index, zero minimum
VTI (Vanguard Total Stock Market ETF) – broader than the S&P 500, covers nearly the entire U.S. market
SWTSX (Schwab Total Stock Market Index Fund) – similar to VTI through Schwab
Any of these are solid starting points. Pick one that’s available on the platform you use and check that the expense ratio is under 0.20%.
How to Actually Start Investing in Index Funds
Open a brokerage or retirement account – Fidelity, Vanguard, or Schwab are all beginner-friendly. If you have a 401k at work, check if index fund options are available there.
Fund your account – transfer money in from your bank account
Search for the fund by name or ticker symbol
Buy shares – start with whatever you can. There’s no minimum on most ETFs.
Set up automatic contributions – recurring investments build the habit
The account isn’t doing anything if you just deposit money and don’t invest it. That’s a common beginner mistake. Go all the way.
What About Market Crashes?
A bear market means the stock market has pulled back significantly – sometimes 20%, 30%, or more. It feels scary. Every headline says it’s getting worse.
No one can accurately predict when to time the market. Not me, not Wall Street analysts, not the financial gurus on social media.
What history shows is that staying invested through downturns – and continuing to buy – has rewarded long-term investors consistently. The people who panic-sell lock in their losses. The people who stay in recover.
Invest money you won’t need for 5+ years, stay consistent, and ignore the noise.
The Main Thing
Index funds are how most everyday investors build wealth. They’re simple, low-cost, and proven over decades. You don’t need a lot of money to start. You just need to start.
Jack Bogle gave regular people access to the same basic wealth-building tools as the wealthy – use them.
Leave a Reply