If you're interested in diversifying your portfolio and dabbling in the American share market, consider investing in a US stock market index fund. These funds track specific US stock market indexes and aim to replicate them. So, index funds typically invest in a basket of the same stocks that make up the index that’s being tracked.
For example, if an index fund in the US stock market tracks the S&P 500 index, it will invest in the 500 stocks that make up that index. As and when the index composition changes, so will the index fund's portfolio.
Since US stock market index funds do not need active monitoring or management, they are considered passive investment options. So, the fund managers often need not make any active decisions about which stocks to choose, when to invest in them and when to exit the positions. They merely have to track the underlying index.
Because of this, US stock market index funds have lower fees than other actively managed funds. They also offer broad market exposure and facilitate portfolio diversification.
This index fund invests at least 80% of its assets in the top large-cap stocks in the US markets. It tracks the Fidelity U.S. Large Cap Index, a float-adjusted market capitalisation-weighted index comprising large-cap US stocks.
Key metrics of the Fidelity ZERO Large Cap Index Fund:
True to its name, the Schwab S&P 500 Index Fund tracks the S&P 500. Its portfolio replicates the stocks that make up the broad market index. It requires no minimum investment and is considered a low-cost fund.
Key metrics of the Schwab S&P 500 Index Fund:
The first index fund for individual investors, the Vanguard 500 Index Fund, also has the S&P 500 as its underlying index. It is also a low-cost fund that makes a suitable addition to the beginner investor’s portfolio.
Key metrics of the Vanguard 500 Index Fund:
Before investing in US stock market index funds, you must know how they compare against US stock ETFs (exchange-traded funds). Broadly, the two investment vehicles are similar in investing in a basket of stocks. They are passive investment options and help you diversify your portfolio quickly and effectively.
However, the key difference is that while US stock ETFs can be traded on the stock exchange, US stock market index funds cannot.
Investing in the US stock markets while living in India is easy — try it via Fi Money. Reduce your portfolio risk with Index Funds, as they can also allow you to enjoy market-linked returns. You can also invest in index funds in the Indian market with the Fi Money app. With an intuitive user interface and the option to invest in over 800 direct mutual funds, the app offers a commission-free route to diversify your portfolio easily.
A US total stock market index fund is a kind of investment vehicle that passively tracks a broad market index like the Wilshire 5000 or the CRSP US Total Market Index. These stock market index funds invest in stocks that make up total market indexes.
If you want to invest passively in the US markets, you can choose from many different US stock market index funds. However, the answer to what’s the best fund among them for you depends on your investor profile.
S&P Dow Jones Indices, MSCI, FTSE Russell, and Bloomberg are 4 of the largest index providers although there are other smaller providers.
