Investors often look to index funds for their simplicity and potential for solid returns. Index funds are designed to track a specific market index, making them a popular choice for those seeking a diversified investment with lower fees. Here, we provide three practical examples of historical returns from well-known index funds, highlighting their performance over time.
The Vanguard 500 Index Fund is one of the most popular index funds, designed to mirror the performance of the S&P 500. This fund is suitable for investors looking for long-term growth through exposure to large-cap U.S. stocks.
In the trailing decade from 2011 to 2021, the Vanguard 500 Index Fund had an average annual return of approximately 16.55%. This performance is reflective of the overall growth in the U.S. stock market during this period, driven by factors such as technological advancements and a recovering economy post-2008 recession.
The Vanguard Total Stock Market Index Fund aims to replicate the performance of the CRSP U.S. Total Market Index, providing investors with exposure to the entire U.S. stock market, including small-, mid-, and large-cap stocks.
From 2011 to 2021, the VTSAX achieved an average annual return of around 16.54%. This figure illustrates the robust performance of the U.S. stock market over the last decade, as well as the benefits of diversification across various stock categories.
The Vanguard FTSE All-World Ex-US Index Fund provides exposure to a wide range of international stocks, excluding U.S. companies. This fund is ideal for investors looking to diversify their portfolio with international equities.
Over the same period from 2011 to 2021, VFWAX delivered an average annual return of approximately 8.48%. While this return is lower than that of U.S.-focused index funds, it is important for investors to consider the potential benefits of international diversification, particularly in a global economy.
These examples of historical returns of popular index funds serve to illustrate the varying performance levels across different market segments and investment strategies. By understanding these historical returns, investors can make informed decisions about their investment portfolios.