Does E*Trade Provide Index Funds?
Are you interested in index funds on E*Trade? Which ones might fit your portfolio best?
Keep reading to discover more!
E*Trade Index Funds Overview
The first index fund was created by well-known investor John Bogle at Vanguard in 1976. This is the Vanguard 500 Index Fund, which follows the S&P 500 as its tracked index.
But wait—what is an index fund, and how does it connect to an index?
The idea behind index funds is pretty simple. These funds, which can be ETFs or mutual funds, are passively managed. Instead of having a fund manager actively adjust them, they track an “index.”
In basic terms, an index (or “market index”) is a group of investments that represents a certain part of the financial market. You’ve probably heard of key indexes like the Dow Jones, S&P 500, and Nasdaq Composite. These indexes act as general references for market performance, and they can also form the basis for index funds, which is our focus here.
First, here are four major advantages of index funds:
Performance – Index funds often deliver better average returns than actively managed funds.
Diversification – Spreading risk is crucial when investing, and index funds can help diversify easily. Many index funds hold hundreds or even thousands of stocks, or even aim to track what Charles Schwab calls “the entire investable equity universe.”
Tax efficiency – Actively managed funds tend to buy and sell frequently, which can mean lots of capital gains. Taxes on those gains can really add up, so a passively managed index fund could help you keep more money over time.
Low fees – With an actively managed fund, you pay for people to try to beat the market, but there’s no promise they will. Such funds often charge about 0.67% per year. Index funds, meanwhile, usually average about 0.15%, leading to major savings in the long run.
Best Index Funds on E*Trade
The idea of the “top” or “best” index funds is always somewhat personal
and depends on your goals. Maybe a utilities index fund has done well, but you’d rather avoid fossil fuels. Or you could be near retirement and prefer a bond index fund, which might not interest a younger investor.
Still, the ten index funds below are all highly regarded and have generally posted strong results. There’s something here for everyone, including the usual big names plus an ESG fund, two bond funds, a real-estate fund, and more. This shows just how simple it can be to diversify with a few low-cost index funds.
Note: each heading includes the fund name, its ticker, and its expense ratio.
Vanguard S&P 500 ETF (VOO) – 0.03%
As the name suggests, this popular ETF tracks the S&P 500. As noted earlier, many investors favor it for the consistent strength and stability of the S&P 500. Vanguard is known for low expense ratios, and this one is just 0.03%.
Vanguard Growth ETF (VUG) – 0.04%
Another Vanguard ETF, another very low expense ratio (0.04%). However, this one may generate higher returns over time compared to an S&P 500 index fund. It follows the CRSP US Large Cap Growth Index, holding 255 large-cap growth stocks in the U.S. About half of its holdings are in the tech sector. Over five years, it has provided an average annual return of 23%, outpacing the S&P 500’s 17% over the same span.
SPDR S&P Dividend ETF (SDY) – 0.35%
Dividends play a big part in building wealth because they provide income for simply holding shares. Not every company offers dividends, and the average dividend yield for the S&P 500 is fairly low—about 1.30% at this writing. This dividend ETF, though, roughly doubles that, with a yield around 2.5-3%. While its expense ratio is higher than those of the ETFs above, it’s still lower than that of many mutual funds. Plus, the dividend yield can effectively balance out the expense ratio.
Vanguard Real Estate ETF (VNQ) – 0.12%
Another effective way to grow your portfolio is by adding something different, like real estate. In the past, real estate was mostly for the wealthy, but you can easily gain exposure through real estate investment trusts (REITs). For a straightforward way to invest, consider this Vanguard REIT fund, which has a 0.12% expense ratio and has averaged 9% annual returns since its 2004 start. It’s done especially well lately, with 33% growth over the past year.
Vanguard Russell 2000 ETF (VTWO) – 0.10%
There are several Vanguard ETFs here for good reason. They helped pioneer index funds and typically keep fees among the lowest. For example, this ETF tracks the Russell 2000 for just 0.10%. The Russell 2000 follows small-cap U.S. stocks, which boosts your portfolio’s diversity. Small-cap stocks can beat large caps because they have more room to expand. This ETF has provided 13.5% annual returns over five years and an impressive 48% over the past year alone.
E*Trade Mutual Funds Commission
E*Trade charges $0 to buy or sell mutual funds. This beats the industry’s average rate.
Firstrade also
charges $0 for the same funds and offers over 11,000 funds (5,000 more than E*Trade).
Free Firstrade Account
Visit Firstrade Website
Schwab Emerging Markets Equity ETF (SCHE) – 0.11%
This ETF follows the FTSE Emerging Index, which focuses on large- and mid-cap stocks in emerging markets (like China and India). By investing in SCHE, you immediately gain global diversification at a reasonable fee. Over the past five years, it has returned 9.5% annually, which is definitely noteworthy.
Change Finance U.S. Large Cap Fossil Fuel Free ETF (CHGX) – 0.49%
As the name indicates, this ETF invests in large-cap companies not directly involved in fossil fuels. The CHGX Index begins with the Solactive US Large & Mid Cap Index, then applies over 50 ESG (environmental, social, governance) filters to exclude companies linked to fossil fuels or controversial activities (child labor, military weapons, etc.). So if you want to invest in big U.S. firms without relying on the S&P 500, this is a solid pick. Though its expense ratio is higher, it’s still fairly low compared to many mutual funds. It may also be worth it if you aim to align your investments with your principles. Returns haven’t been sacrificed, either, with an 18% average annual gain over the past three years.
iShares ESG Aware U.S. Aggregate Bond ETF (EAGG) – 0.12% expense ratio
This bond fund tracks an index of U.S. dollar-denominated, investment-grade bonds from issuers generally chosen for favorable ESG practices. At the same time, it aims to match the risk and return profile of the overall U.S. investment-grade bond market. Essentially, this fund behaves like a typical bond fund but limits exposure to issuers with weaker ESG practices. It can be a good option if you want a sustainable fixed income portfolio and long-term diversification.
Best E*Trade Mutual Funds Wrapping up
Index funds are a cornerstone of today’s portfolios. They let you own a range of securities under a single ticker. Many also offer very low expense ratios, especially compared to some actively managed mutual funds. Because of their diversification, minimal cost, and solid long-term results, index funds can be a great fit for investors, especially those who like a buy-and-hold approach.
Updated on 3/3/2025.
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 Brokerage-Review.com, Chad can usually be found
managing his portfolio or building a new home computer.
|