I’ve always been a little wary of investing, as I’ve never quite understood how it all worked. I’ve never followed the FTSE 100, S&P 500, or NASDAQ 100, and have never felt confident enough to invest. But like most things in life, it comes down to being educated on a topic to have a good understanding.
And that’s what I’ve done. As retirement is starting to loom on the horizon, I decided it was time to learn more about the funds, investing, and exactly what’s involved. So I sat down with a specialist who explained it all to me.
I was surprised to realize it wasn’t as complicated as I’d first thought, and it comes down to the funds you choose and the ability to be a little bit patient.
A Quick Start Guide To Investing
If you’re new to investing, some of the language used to describe index funds can feel like a foreign language, at least it did to me. Here’s a plain-English breakdown of the terms you’ll see throughout this article.
Expense Ratio
This is the annual fee a fund charges you to manage your money. It’s expressed as a percentage of however much you’ve invested.Â
An expense ratio of 0.06% means you pay 60 cents a year for every $1,000 invested. Index funds keep these fees extremely low, which means more of your money stays working for you.
Dividend Yield
Some funds hold companies that pay shareholders a portion of their profits on a regular basis. These payments are called dividends.
The yield tells you how much you’re receiving annually as a percentage of the fund’s current price.
A yield of 3.47% means that for every $1,000 you have invested, you’re receiving around $34.70 per year in dividend income, paid out in quarterly installments.
Individual Positions Capped
This refers to how much of the fund a single company can take up. If individual positions are capped at 4%, that means no single stock can make up more than 4% of the total fund.
It’s a guardrail that stops the fund from becoming too dependent on any one company’s performance.
Sectors Capped
The stock market is divided into sectors, which are groups of companies in similar industries, such as technology, healthcare, or energy. A sector cap of 25% means the fund won’t put more than a quarter of its money into any one industry.
Again, this is about spreading risk so that a bad year for tech, for example, doesn’t wipe out your entire return.
Rebalanced Quarterly
Over time, some holdings in a fund will grow faster than others and gradually take up a bigger slice of the portfolio than intended.
Rebalancing is the process of trimming those positions back down and redistributing the money to bring everything back in line with the original targets. Quarterly rebalancing means this happens four times a year.
Annualized Return
You’ll see this used when describing a fund’s historical performance over multiple years. Rather than showing you the total return over a decade, it converts that figure into an average yearly return so you can more easily compare funds.
A 10-year annualized return of 15% doesn’t mean the fund made exactly 15% every single year. Some years were better, some were worse. It’s the average of that figure.
The Guide To 7 Index Funds That Give Good Returns
Index funds are the simplest way to get started. Instead of picking individual stocks and gambling on whether one company will succeed, you buy a fund that holds hundreds or thousands of companies at once. When the market grows, your money grows with it.
The seven funds below cover everything from the S&P 500’s biggest players to real estate, bonds, and international markets.
Fidelity 500 Index Fund (FXAIX)
For a new investor looking for a single, reliable starting point, FXAIX is hard to argue with.
It tracks the S&P 500, putting your money across 500 of the largest publicly traded US companies in one purchase. That list includes Apple, Microsoft, Nvidia, Amazon, and hundreds more spanning every major industry.
The fee structure is about as low as it gets. FXAIX carries an expense ratio of just 0.02%, which comes in 98% below the average for its category. On a $10,000 investment, that’s $2 in fees per year.
The performance history backs up the data, which is important. The fund posted annual returns of 17.86% in 2025 and 25% in 2024, with a 10-year annualized return of 15.49%.
There’s no minimum investment and no barrier to entry. A few dollars are enough to get started.
Schwab U.S. Dividend Equity ETF (SCHD)
Not every investor is chasing price growth. Some want their portfolio to generate regular income, and that’s where SCHD comes in.
The fund selects its holdings from companies with a proven track record of paying dividends for at least a decade, then screens them further using financial ratios that measure balance-sheet quality. The result is a portfolio of financially sound, mature businesses that pay shareholders quarterly cash dividends.
SCHD carries an expense ratio of 0.06% and currently yields around 3.47%. Individual positions are capped at 4% of the portfolio, and sectors are capped at 25%, with the full composition reviewed annually and rebalanced quarterly.
For investors who reinvest those quarterly payments, the compounding effect over the long run can be significant. SCHD also tends to hold its ground better than growth-heavy funds when markets turn rough, which makes it a popular choice for people who want income without taking on unnecessary risk.
Vanguard Total Stock Market ETF (VTI)
The S&P 500 covers the largest 500 US companies. VTI goes further.
This fund tracks over 3,700 companies across all sizes and sectors of the US economy, from household-name corporations down to smaller businesses, all at an expense ratio of just 0.03%.
The logic here is simple. A company that’s small today might be dominant in ten years. VTI already holds it. You capture that growth without having to identify the winners in advance.
Technology, healthcare, financials, consumer goods, energy, and every other sector all have a seat at the table. When one area of the market struggles, others can offset the damage. That built-in diversification is a big part of why broad market index funds have outperformed most actively managed funds over long time horizons.
Vanguard Real Estate ETF (VNQ)
Owning property is one of the oldest ways to build wealth. VNQ gives you that exposure without a mortgage, a landlord headache, or a down payment.
The fund holds real estate investment trusts, or REITs, which own and operate income-producing properties. We’re talking apartment blocks, warehouses, data centers, hospitals, and retail space.
By law, REITs must distribute at least 90% of their taxable income to shareholders, which is why VNQ consistently pays dividends well above those of most stock funds.
The 12-month dividend yield was 3.92% as of December 2025, and the expense ratio was 0.12%.
Real estate values and rents have historically risen alongside inflation, which gives VNQ some insulation against rising prices. It also moves differently from equities much of the time, helping smooth out volatility across a broader portfolio.
iShares Core U.S. Aggregate Bond ETF (AGG)
Stocks can be a wild ride. AGG is the counterweight.
The fund covers the full investment-grade US bond market: government Treasury bonds, corporate debt, and mortgage-backed securities, all in one holding. It doesn’t generate the kind of returns that equity funds do in a bull market, but that’s not what it’s designed for. When stock markets drop sharply, AGG tends to hold steady or even gain.
The expense ratio is 0.03%, and the fund makes regular income distributions that appeal to retirees and more conservative investors seeking predictable cash flow.
One thing to understand going in: bond prices and interest rates move in opposite directions. When rates rise, bond values temporarily fall. Patient investors who hold through those periods still collect their interest payments and generally come out fine over time.
A common starting allocation for new investors is roughly 85% in stock funds and 15% in something like AGG. It keeps growth potential high while adding a layer of stability.
Fidelity ZERO Large Cap Index Fund (FNILX)
FNILX has zero fees, no minimum investment, and performance that closely tracks America’s largest companies.
The expense ratio is literally 0%. Fidelity achieved this by building its own proprietary large-company index rather than licensing the official S&P 500, thereby eliminating the licensing cost entirely and passing that saving directly to investors.
The fund rose around 17% in 2025, slightly trailing the official S&P 500 for the year, but the gap is minor. The zero-fee structure means more of whatever return you earn stays in your account, year after year.
The one limitation is that FNILX is only available through Fidelity. If you’re already on that platform or planning to open an account there, it’s one of the more compelling options on this list.
Vanguard Total International Stock ETF (VXUS)
The US stock market is enormous, but it represents only a portion of global economic output. VXUS covers the rest.
The fund holds stocks in more than 7,000 companies across developed and emerging markets worldwide, with European equities making up around 40% of the portfolio, Pacific region companies at 26%, and emerging markets at roughly 26%, all at an expense ratio of 0.07%.
International markets don’t always move in step with US markets. That gap can work in your favor. When the US is underperforming, other regions may be picking up the slack, and holding both smooths out the overall ride.
VXUS also pays regular dividends, yielding around 2.86% as of late 2024.
Many financial advisors recommend pairing an international fund with a US-focused one as a basic diversification strategy. VXUS makes that straightforward with a single purchase.
How Much Do You Need To Start?
Less than most people think.
Several funds here, including FXAIX, FNILX, and VTI, have no minimum investment at all and can be started with a few dollars. The ETFs on the list, including VNQ, AGG, SCHD, and VXUS, trade like stocks and can be purchased for the price of a single share.
Disclaimer: this article is for informational purposes only and is not financial advice. Always do your own research and consider speaking with a financial advisor before making investment decisions.
Disclaimer: The content in this article is for informational purposes only and is not intended as financial, investment, or tax advice. Always consult a qualified financial advisor or tax professional before making decisions about your money, investments, or retirement planning.
Disclaimer: This article is for general information only and is not professional advice. It may contain affiliate links. Please see our full Editorial Policy for details.
Kylie Lang is a nationally syndicated travel journalist with bylines on the Associated Press Wire & more, a lifestyle writer, and the founder and editor of Your Lifestyle Library (yourlifestylelibrary.com). She holds a BA (Honours) in History from the University of Kent and is a member of the British Guild of Travel Writers.