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Best Mutual Funds and Index Funds on Etrade

2023: Can I buy index mutual funds on Etrade? Best index funds: S&P 500, Dow, Nasdaq, small/medium/large cap index funds fees.

Does Etrade Offer Index Funds?

Are you curious about index funds on Etrade? How about the best index funds for your portfolio? Read on to learn more!

Index Funds Overview

The first index fund was started by legendary investor John Bogle at Vanguard in 1976. This is the Vanguard 500 Index Fund, whose underlying index is the S&P 500.

But wait a second—what’s an index fund and what’s its relation to an index?

The concept of index funds is rather straightforward. These funds, which can be ETFs or mutual funds, are passively run. That means that rather than a fund manager actively overseeing them and making adjustments, they track an “index” instead.

In essence, an index (or “market index”) is a portfolio of investment holdings set up to represent a particular segment of the financial market. You have already likely heard of some major indexes, such as the Dow Jones, S&P 500 index, and Nasdaq Composite Index. These indexes are used as general benchmarks to gauge the state of the stock market. They can also be used, however, for developing index funds, which is what this article will be covering.

First, here are four major benefits to index funds:

Performance – Index funds tend to produce better returns on average than actively managed funds.

Diversification – Spreading out risk is an essential part of investing, and index funds can provide easy portfolio diversification. Many index funds provide exposure to hundreds or even thousands of stocks, or even attempt to track almost “the entire investable equity universe,” as Charles Schwab puts it.

Tax efficiency – Actively managed funds tend to have high turnover, which means they potentially generate lots of capital gains. The returns lost to taxes can really add up, so a passively managed index fund might net you thousands of more dollars over time.

Low fees – For an actively managed fund, you’re essentially paying for someone (or a team of people) to beat the market. There’s never a guarantee of that, however, and actively managed funds tend to charge 0.67% on average in annual fees. Index funds, on the other hand, tend to average a mere 0.15% by comparison. That makes for huge savings over the long run.

Top Index Funds

Now, the question of the “top” or “best” index funds is always going to be rather subjective and dependent on your goals as an investor. For example, perhaps an utilities index fund has performed quite well, but you don’t want to contribute to fossil fuels. Or maybe you’re nearing retirement and a “top” index fund for you would be a bond fund, which might not appeal at all to a younger investor.

That said, the ten index funds that follow are all highly rated and have generally performed well. There’s also something for everyone, with not only the usual suspects but also an ESG fund, two bond funds, a real-estate fund, and more. This shows you just how easy it is to diversify your portfolio with a handful of low-cost index funds.

Note: each heading provides the fund name, its ticker, and its expense ratio.

Vanguard S&P 500 ETF (VOO) – 0.03%

As the name would suggest, this is one of the most popular ETFs for tracking the S&P 500 index. As mentioned above, this is a frequent choice for investors due to the long-term strength and stability of the S&P 500 index. Vanguard typically has low expense ratios, and this fund is no exception with its 0.03% ratio.

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Vanguard Growth ETF (VUG) – 0.04%

Another Vanguard ETF, another super low expense ratio (0.04%). This one, however, is likely to produce larger gains over time than the S&P 500 index fund. That’s because this fund tracks the CRSP US Large Cap Growth Index, which includes 255 U.S. large-cap growth stocks. This means the fund is relatively tech-heavy, with about half of the fund’s holdings falling into that sector. Over the past five years, the fund has averaged annualized returns of 23%, easily outpacing the S&P 500’s annualized returns of 17% over the same period.

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SPDR S&P Dividend ETF (SDY) – 0.35%

Dividends are an important part of building wealth as they allow you to receive income payments for simply holding shares. Not all companies, however, offer dividends, and the average dividend yield for the S&P 500 is nothing major—around 1.30% at the time of writing. This dividend ETF, however, roughly doubles that, with a yield hovering around 2.5-3%. While the expense ratio is substantially higher than the above ETFs, its still rather low compared to many mutual funds. Plus, you can conceive of the expense ratio as being entirely offset by the dividend yield.

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Vanguard Real Estate ETF (VNQ) – 0.12%

Another smart way to supercharge the growth of your portfolio is through an alternative asset such as real estate. Although real estate investing was once only for the wealthy, you can easily add this unique asset class to your portfolio through real estate investment trusts, or REITs. To easily capture this asset class, you can simply opt for this Vanguard REIT fund, which has a low expense ratio of 0.12% and features 9% annualized returns since inception in 2004. The fund has performed particularly well of late as the housing market has gone off the rails, with 33% growth over the past year.

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Vanguard Russell 2000 ETF (VTWO) – 0.10%

There’s a reason there are so many Vanguard ETFs here. They’re not only innovators in the index fund space but they consistently have among the lowest expense ratios out there. This ETF, for example, allows you access to the Russell 2000 index for an expense ratio of just 0.10%. The Russell 2000 tracks small-cap U.S. stocks, which helps diversify your portfolio. Plus, small-cap stocks frequently outperform large-cap stocks as they have a larger runway for growth. Over five years, for example, this ETF has given investors 13.5% in annualized returns, with a whopping 48% over the past year alone.

E*Trade Mutual Funds Commission

E*Trade is charging $19.99 to buy or sell mutual funds not it NTF program. This is lower than average rate. However, both Chase and Firstrade charge $0 for the same funds.

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Schwab Emerging Markets Equity ETF (SCHE) – 0.11%

This fund tracks the FTSE Emerging Index, which itself tracks large- and mid-cap equities from emerging markets (think countries such as China and India). Investing in the SCHE gets you instant global diversification for a very reasonable expense ratio. The ETF has also delivered 9.5% annualized returns over the past five years, which is certainly nothing to scoff at.

Change Finance U.S. Large Cap Fossil Fuel Free ETF (CHGX) – 0.49%

As you can tell from its name, this ETF holds large-cap companies that are not directly involved in fossil fuels. The CHGX Index starts from the Solactive US Large & Mid Cap Index, then uses more than 50 different ESG (environmental, sustainability, governance) criteria to exclude companies involved in fossil fuels and other controversial business practices (child labor, military weapons, etc.). So, if you want to invest in large U.S. companies without investing in the S&P 500, this is a great way to do it. The expense ratio is considerably higher but it’s still reasonable compared to many mutual funds. Plus, you may decide it’s worth it depending on how much you want to align your investments with your values. This doesn’t have to sacrifice returns either, with annualized returns of 18% over the past 3 years.

iShares ESG Aware U.S. Aggregate Bond ETF (EAGG) – 0.12% expense ratio

This bond fund tracks an index composed of U.S. dollar-denominated, investment-grade bonds from issuers generally evaluated for favorable environmental, social and governance practices. At the same time, it attempts to mirror the same risk and return characteristics of the general U.S. investment-grade bond market. In other words, this bond fund attempts to behave like a standard bond fund while restricting exposure to bond issuers that exhibit better ESG practices. This can help investors build a sustainable fixed income portfolio and also diversify for the long term.

Best Etrade Mutual Funds Wrapping up

Index funds are an essential part of a modern portfolio. They provide instant diversification by offering a basket of securities under one ticker. Many of them also have extremely low expense ratios, especially compared to some actively managed mutual funds. Thanks to their diversification, low cost, and strong long-term returns, index funds make a great deal of sense for investors, especially those who are more of the “buy-and-hold” mentality.

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About the Author
Chad Morris is a financial writer with more than 20 years experience as both an English teacher and an avid trader. When he isn’t writing expert content for, Chad can usually be found managing his portfolio or building a new home computer.