8 Dirt-Cheap Index Mutual Funds for Thrifty Investors

Cost is one of the biggest edges for index mutual funds, which don't need to pay large money management teams to run the show.

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Cost is one of the biggest edges for index mutual funds, which don't need to pay large money management teams to run the show. Annual expenses pull on your returns both in the form of actual fees paid and lost opportunity cost; every dollar you don't pay a fund provider is a dollar that's getting invested and compounding over time.

But index funds' actual performance isn't anything to sneeze at, either. Actively managed mutual funds routinely fail to beat the benchmark indices, and it has been that way for a long time. So if you can't beat the index, why not join it?

Selecting an index fund comes down to knowing the index you want to track, then finding an inexpensive product that does it. That straightforward nature makes index funds an ideal choice for most investors, but especially beginners looking to gain broad market exposure cheaply and efficiently. Today, we'll help start your search by examining index mutual funds that provide inexpensive access to popular stock and bond benchmarks.

You'll notice a theme: Fidelity Investments is large and in charge. Scott O'Reilly, head of index, sector, international and factor products at Fidelity, says the company can keep expenses low thanks to its status as a private firm with access to scale.

Technology also is "an essential part of the investment and operational processes," he says. "Investments in technology help drive efficiencies that allow us to manage index funds at a low cost."

With that in mind, here are eight of the cheapest index mutual funds tracking eight of the most common stock- and bond-market indices.

Data is as of May 3. Yields represent the trailing 12-month yield, which is a standard measure for equity funds.

Coryanne Hicks
Contributing Writer, Kiplinger.com

Coryanne Hicks is an investing and personal finance journalist specializing in women and millennial investors. Previously, she was a fully licensed financial professional at Fidelity Investments where she helped clients make more informed financial decisions every day. She has ghostwritten financial guidebooks for industry professionals and even a personal memoir. She is passionate about improving financial literacy and believes a little education can go a long way. You can connect with her on Twitter (opens in new tab), Instagram (opens in new tab) or her website, CoryanneHicks.com (opens in new tab).