Indexed Funds Calculator – Index Fund Growth Calculator
Calculate indexed fund investment growth and returns
How to Use
- Enter your initial investment amount
- Input your monthly contribution amount
- Enter the investment period in years
- Set your expected annual return rate (e.g., 7-10% for stock indexes)
- Input the fund's expense ratio (typically 0.03%-0.20% for index funds)
- Calculate to see your investment growth projection
What are Indexed Funds?
Indexed funds (or index funds) are mutual funds or ETFs designed to track the performance of a specific market index, like the S&P 500, total stock market, or international indexes. Instead of trying to beat the market, they aim to match it by holding the same stocks in the same proportions as the index.
Index funds are the cornerstone of passive investing. They offer broad diversification, low costs, and consistent long-term returns that have historically outperformed most actively managed funds after fees.
Why Choose Index Funds?
- Low expense ratios—typically 0.03% to 0.20% vs. 0.5% to 2% for actively managed funds
- Instant diversification across hundreds or thousands of stocks
- Tax efficiency due to low turnover
- Consistent market-matching performance
- No need to pick individual stocks or time the market
- Proven track record—index funds outperform 80-90% of actively managed funds over 15+ years
- Minimal time and expertise required
- Transparent holdings that mirror the index
The Impact of Expense Ratios
Even small differences in expense ratios have a massive impact over time. Here's how different expense ratios affect a $10,000 investment with $500 monthly contributions at 8% annual return over 30 years:
| Expense Ratio | Final Value | Fees Paid | Difference |
|---|---|---|---|
| 0.03% (Excellent) | $745,179 | $6,729 | Baseline |
| 0.10% (Good) | $738,207 | $22,185 | -$6,972 |
| 0.50% (Average) | $698,614 | $106,959 | -$46,565 |
| 1.00% (High) | $652,940 | $207,633 | -$92,239 |
A 1% difference in expense ratio costs nearly $100,000 over 30 years! This is why low-cost index funds from providers like Vanguard, Fidelity, and Schwab are so popular.
Building an Index Fund Portfolio
A simple three-fund portfolio can provide complete global diversification:
- 60% U.S. Total Stock Market Index (VTI, FSKAX, SWTSX)
- 30% International Stock Index (VXUS, FTIHX, SWISX)
- 10% U.S. Bond Index (BND, FXNAX, SWAGX)
Adjust the percentages based on your age, risk tolerance, and goals. Younger investors might use 90% stocks, while retirees might prefer 40% stocks and 60% bonds.
Frequently Asked Questions
- What's a good expected return for index funds?
- The S&P 500 has returned about 10% annually over the long term, though individual years vary widely. Conservative investors might use 7-8% to account for inflation and provide a margin of safety. Remember that past performance doesn't guarantee future results.
- How do index funds differ from ETFs?
- Index funds and ETFs can both track indexes. The main difference is how they trade: mutual fund index funds trade once daily at market close at their net asset value, while ETFs trade throughout the day like stocks. Both can have very low expense ratios, though ETFs are sometimes slightly cheaper.
- What's a good expense ratio for an index fund?
- Excellent index funds charge 0.03% to 0.10%. Anything above 0.20% is high for a passively managed index fund. Always compare expense ratios when choosing between similar index funds—lower is better.
- Can I lose money in index funds?
- Yes, index funds can lose value during market downturns. However, historically, broad stock market indexes have recovered from every downturn and reached new highs over time. That's why index funds work best for long-term investors (10+ years) who can ride out market volatility.