In the debate over active versus passive mutual funds, investors have been voting with their wallets by cashing out of actively managed funds and moving into passively managed funds. Morningstar's data indicates that, between July 2013 and June 2014, for every $3 of investment in mutual funds, $2 went to passively managed funds. The main reason for this is the lower cost of passive funds. Active managers have difficulty in consistently outperforming their benchmark indexes. The index mutual fund industry began with Vanguard's 500 index fund back in 1976 and now boasts nearly 300 funds, not including more than 900 exchange-traded funds (ETFs).

Vanguard 500 Index Fund

The index fund that started it all remains as one the best for its overall long-term performance and low cost. The Vanguard 500 Index Fund has dutifully matched the returns of the S&P 500 index for more than four decades while charging management fees of just 0.17%. As of October 2015, its assets of more than $200 billion are invested in 509 different large-cap stocks weighted by market capitalization based on the actual S&P 500 index. The Vanguard 500 Index Fund has returned 6.68% over the last 10 years and 13.17% over the last five years. It has a very low expense ratio of 0.17%.

Vanguard Total Stock Market Index Fund

The Vanguard Total Stock Market Index Fund was among the very first funds to invest in the total stock market to include mid- and small-cap stocks, which has enabled it to outperform the S&P 500 over the last several years. The $371 billion fund tracks the MSCI U.S. Broad Market Index comprises nearly 100% of the total market capitalization of U.S. stocks traded on the New York Stock Exchange (NYSE) and the NASDAQ. The Vanguard Total Stock Market Index Fund has returned 6.97% over the last 10 years and 13.15% over the last five years. Like the Vanguard 500 Index Fund, it also has a 0.17% expense ratio.

The Fidelity Spartan 500 Index Fund

Next to Vanguard, Fidelity offers the widest range of index funds available in the industry. Its flagship index fund is the Fidelity Spartan 500 Index Fund. As of October 2015, the fund has nearly $85 billion in assets invested in 509 stocks, with a high concentration in the information technology, financial, health care and consumer discretionary sectors. Because the fund can invest as much as 20% of its assets outside of the S&P 500 Index, it tends to be a little more volatile than the index. That also offers the potential to outperform the index. The fund has returned 6.73% over the last 10 years and 13.24% over the last five years. Its 0.09% expense ratio is one of the lowest available.

Schwab Total Stock Market Index Fund

Vanguard and Fidelity may dominate the index fund industry in terms of size, but Schwab has come on strong with its own menu of low-cost funds, led by the Schwab S&P Total Stock Market Index Fund. This fund tracks the Dow Jones U.S. Total Stock Market Index, which consists of the entire U.S. stock market. The fund may invest in short-term derivatives and futures contracts to close the performance gap that typically exists between the fund and the index. It may also choose to focus investments in a particular sector or group of sectors based on their relative weighting in the index. Over the last 10 years, the Schwab Total Stock Market Index Fund has returned 7.08%. For the last five years, it has returned 13.22%. It has a rock-bottom expense ratio of 0.09%.

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