Indexes - or indices - are collections of selected stocks or other investments. Some of the best known indexes include the S&P 500, which tracks the share price performance of the 500 largest companies listed on the US exchanges, or the ASX 200, which tracks the largest 200 companies listed in Australia. But there are also indexes that track sectors and industries, like technology or clean energy, as well as bonds, IPOs, currencies, growth stocks and more.
Index funds track these indexes, allowing investors to track their performance. They do this by allowing to buy a basket of shares that matches the composition of the index with just a single trade, rather than trying to buy all the stocks in a given index individually.
Index funds can be bought as either exchange-traded-funds (ETFs) or as mutual funds, but ETFs will almost always have lower costs and can be bought and sold on the CMC Markets Invest platform like any other share.
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Advantages of index funds
Disadvantages of index funds
The two most important metrics of index funds are their performance and their costs.
Past performance is no guarantee of future success, but it does indicate recent market sentiment.
The costs of managing an index fund is captured in its expense ratio. For ETFs, these can be as low as 0.03% annually. This means that for every $10,000 invested, you would pay $3 in annual fees.
Below are the top-performing funds according to a share price increase over the past five years, as of early October 2021. Only funds with at least an average daily volume of 100,000 trades are included.
| SYMBOL | NAME | GAIN |
|---|---|---|
| QCLN | First Trust NASDAQ Clean Edge Green Energy Index Fund | 326% |
| TAN | TAN Invesco Solar ETF | 321% |
| SOXX | SOXX iShares Semiconductor ETF | 316% |
| IBUY | IBUY Amplify Online Retail ETF | 301% |
| LIT | LIT Global X Lithium & Battery Tech ETF | 268% |
| IYW | IYW iShares U.S. Technology ETF | 256% |
| SKYY | SKYY First Trust Cloud Computing ETF | 216% |
| QQQ | QQQ Invesco QQQ Trust | 214% |
| FINX | FINX Global X FinTech ETF | 210% |
| IPO | IPO Renaissance IPO ETF | 203% |
Here are the index funds with the lowest expense ratios. Only funds with at least 100,000 share daily average volume are included. Only one fund from each category is included.
| SYMBOL | NAME | EXPENSE RATIO |
|---|---|---|
| IVV | iShares Core S&P 500 ETF | 0.03% |
| VTI | Vanguard Total Stock Market ETF | 0.03% |
| SCHX | Schwab US Large-Cap ETF | 0.03% |
| VTV | Vanguard Value ETF | 0.04% |
| VUG | Vanguard Growth ETF | 0.04% |
| SPDW | Vanguard Mid-Cap ETF | 0.04% |
| USIG | iShares Broad USD Investment Grade Corporate Bond ETF | 0.04% |
| VEA | Vanguard FTSE Developed Markets ETF | 0.05% |
Below are the top-performing funds listed on the ASX, according to a share price increase over the past year, as of mid-November 2021.
| SYMBOL | NAME | GAIN |
|---|---|---|
| OOO | BetaShares Crude Oil ETF Ccy Hgd(Synth) | 131% |
| LNAS | ETFS Ultra Long Nasdaq 100 Hedge | 117% |
| GGUS | BetaShares Geared US Eq Ccy Hdg ETF | 112% |
| FUEL | BetaShares Glb Energy Coms ETF-Ccy Hdg | 77% |
| GEAR | BetaShares Geared Australian Equity ETF | 66% |
| BNKS | BetaShares Glb Banks ETF-Ccy Hdg | 62% |
| ACDC | ETFS Battery Tech and Lithium ETF | 56% |
| MVB | VanEck Australian Banks ETF | 55% |
| HACK | BetaShares Global Cybersecurity ETF | 51% |
| VVLU | Vanguard Global Value Equity Active ETF | 51% |
