Hello Reader,
Happy Wednesday!
If you’ve ever Googled how to invest, you’ve probably heard the advice: “Just buy index funds.”
Sounds simple, right?
But then you search for index funds… and there are hundreds. Maybe thousands. What exactly are you supposed to buy?
Today, I’m breaking it down so you can make smarter, more confident decisions — even if you’re just getting started.
First, what’s an index fund?
An index fund is a low-cost way to invest in a basket of stocks or bonds that track a specific part of the market.
They give you:
- Instant diversification
- Lower fees
- Less guesswork
But here’s what no one tells you:
“Index fund” is a category — not a strategy. There are many kinds of index funds, depending on what slice of the market you want.
Here Are 5 Common Types of Index Funds
1. Broad Market Funds
Want exposure to everything? These track the entire U.S. stock market — large, mid, and small caps.
- VTI – Vanguard Total Stock Market ETF
- ITOT – iShares Core S&P Total U.S. Market
Best for: Set-it-and-forget-it investors who want full U.S. coverage.
2. Market Cap Funds
Want to focus on companies of a certain size?
- $VOO – Large-cap (big companies like Apple, Google)
- $VO – Mid-cap (medium-sized firms)
- $VB – Small-cap (smaller, high-growth firms)
Best for: Those looking to fine-tune risk/reward exposure.
3. Bond Index Funds (Fixed Income)
Not all index funds are stocks. These track bond markets, providing stability and income.
- $BND – Investment-grade U.S. bond fund
- $TIP – TIPS (bonds that adjust for inflation)
Best for: Diversifying risk and generating income.
4. Sector Index Funds
Want to bet on specific industries? These funds track individual sectors.
- $VGT – Tech
- $VHT – Healthcare
- $XLF – Financials
Best for: Strategic exposure to high-growth or defensive sectors.
5. International Index Funds
These give you global diversification beyond U.S. borders.
- $VXUS – Total International
- $VGK – Europe
- $VPL – Asia-Pacific
- $VWO – Emerging Markets
Best for: Long-term diversification and reducing U.S. concentration risk.
Final Thought
Index investing is powerful — but not one-size-fits-all. It’s not about picking the “best” fund. It’s about knowing what you want exposure to — and aligning your picks with your goals.
Want to learn more about investing
Read my blog page for a more in-depth guide for new investors.
Wealth isn’t built overnight. But with the right habits, it’s inevitable.
Check out my X post on 5 Money Rules from Ramit Sethi.
JJ – Millionaire Mindset
@JJsFinclub
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7:4 AM • Jul 21, 2025
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Yours truly,
JJ
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