Top 6 Index Funds for 2021

May 20, 2021 14:15 UTC
Reading time: 15 minutes

An index fund is an investment product that tracks a specific basket of stocks or bonds. They are similar to mutual funds and provide investors with broad diversification at a low cost.

If you’re interested in learning more about the best index funds to invest in, the best time to invest in index funds and how to invest with low commissions, then keep on reading!

Best Index Funds List

Below is a quick snapshot of some of the best funds available to investors and a detailed analysis of what investment exposure each one provides.

There are a variety of different investment management companies that provide investors access to low cost index funds. These include Vanguard index funds, Fidelity index funds and many others, as highlighted below.

These companies create and manage products called exchange traded funds (ETFs). These track an underlying index and are listed on a stock market for investors to access. Here are a few funds worth a mention:

  1. Vanguard S&P 500 UCITS ETF - Best Index Fund for the US Stock Market
  2. SPDR MSCI Europe UCITS ETF - Best Index Fund for European Stocks
  3. iShares MSCI China ETF - Best Index Fund for Chinese Economic Growth
  4. xTrackers MSCI Emerging Markets Index - Best Index Fund for Emerging Markets
  5. iShares Select Dividend ETF - Best Index Fund for High Dividend Paying US Equities
  6. L&G Gold Mining UCITS ETF - Best Index Fund for Gold Mining Companies

Of course, this list is not exhaustive and what is considered the best index fund will be different to each investor. However, the index funds highlighted are some of the most well-known that track a certain index, be it the S&P 500 stock market index, the Nasdaq index, Gold mining index and more.

As with any form of investing, risk management is key so be sure to do your research and use the information below as a starting point. Further on, you will see how the Admirals Premium Analytics tool can help you find actionable trading insights into some of these funds!

6 Index Funds: Research & Analysis

Now let’s take a look at each one of these funds in a bit more detail before we look at how to invest in them with low commissions and a state of the art investing platform!

1. Vanguard S&P 500 UCITS ETF (VUSA)

The Vanguard S&P 500 UCITS ETF was created on 22 May 2012 and has since grown to be one of the go-to funds for exposure to the US stock market. The fund uses passive management techniques to track the performance of the Standard and Poor’s 500 Index, commonly known as the S&P 500 index.

The index measures the performance of the largest 500 stocks listed on the New York Stock Exchange by market capitalization. The index fund from Vanguard is considered a low cost fund as it only charges a 0.07% ongoing charge which covers management costs to run the fund.

In Berkshire Hathaway’s 2014 shareholder letter, legendary investor Warren Buffett recommended that the cash left to his wife should be 90% invested in a very low cost Vanguard S&P 500 index fund with 10% in short term government debt.

Index Funds Vanguard S&P 500

Source: Vanguard, 20 May 2021. Past performance does not guarantee future performance.

2. SPDR MSCI Europe UCITS ETF (ERO)

SPDR (Standard and Poor’s Depositary Receipt) funds are created and managed by investment management company State Street Global Advisors. They provide access to a wide range of SPDR funds, also known as ‘spiders.’

The SPDR MSCI Europe fund aims to track the performance of the MSCI Europe Index created by the company formerly known as Morgan Stanly Capital International. The objective of the fund is to track the performance of large and mid-sized companies in Europe.

Index Funds MSCI Europe SPDR

Source: SSGA, 20 May 2021. Past performance does not guarantee future performance.

This index fund provides broad exposure to European stock markets. Some of the top holdings in the fund include shares in Nestle SA, ASML Holding NV, Unilever PLC, SAP SE and HSCB Holdings PLC among others.

As of May 2021, 22.94% of the holdings were from the UK, with 17.93% from France and 14.80% from Germany with the rest across all of the other major European countries such as Sweden, Spain, Netherlands and more.

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3. iShares MSCI China ETF (MCHI)

iShares by BlackRock is another very well known index fund provider, offering a range of funds covering different markets. The iShares MSCI China ETF aims to track the performance of the MSCI China Index which is composed of Chinese companies that are available to international investors.

The index fund provides exposure to China’s stock market which is difficult for foreign investors to access directly. Investments in the fund are from a variety of stock sectors. As of May 2021, 32.06% of the fund was invested in Consumer Discretionary stocks, 20.26% in Communication stocks, 14.36% in Financials with the rest covering energy, health, utilities and other sectors.

iShares MSIC China Index Fund ETF

Source: iShares, 20 May 2021. Past performance is not a guarantee of future performance.

While some investors remain keen on investing in China, it is worthwhile noting that investments in this region tend to be quite volatile. Some of the top holdings of the fund include Tencent Holdings, Alibaba Group ADR, China Construction Bank, JD.com ADR, Baidu ADS, Xiaomi Corp and many others.

4. xTrackers MSCI Emerging Markets Index (XMEM)

xTrackers are ETFs that are created and managed by DWS Investments. They provide investors exposure to different asset classes covering commodities, equities, fixed income and multi-asset funds.

The xTrackers MSCI Emerging Markets Index fund aims to reflect the performance of certain shares in companies from global emerging market countries determined by MSCI. These companies tend to be large to medium-sized such as Tencent Holdings, Samsung Electronics, Vale SA, Taiwan Semiconductor Manufacturing, Reliance Industries and many others.

As of May 2021, 34.71% of the fund was allocated to companies in China, 13.56% to Taiwan, 13.41% to the Republic of Korea, 9.92% to India, 4.97% to Brazil with the rest covering other countries such as Russia, Saudi Arabia and more.

5. iShares Select Dividend ETF

The iShares Select Dividend ETF is unique in the fact that it aims to track an index that is composed of high dividend paying US stocks. The benchmark index used by iShares is the Dow Jones US Select Dividend Index.

The fund offers investors access to the broad exposure of 100 US stocks with a 5-year record of paying dividends. The index covers all different sectors with the majority from the Utilities and Financials stock market sectors.

iShares Select Dividend ETF Index Funds

Source: iShares, 20 May 2021

Some of the companies in the top 10 include Altria Group, Oneok, AT&T, IBM, Exxon Mobil and others, as the screenshot shows above. 

6. L&G Gold Mining UCITS ETF

Investment management company Legal & General also provided investors access to a variety of different funds. This includes the L&G Gold Mining UCITS ETF. The aim of this fund is to track the performance of the Global Gold Miners Index, thereby providing investors exposure to the gold mining sector.

Investments within the index fund are from a variety of different countries including Canada, the United States, South Africa, Australia, the United Kingdom and more. While the currency of the individual investments vary the fund is priced in US dollars.

Some of the top holdings in the fund include Newmont, Barrick Gold, AngloGold Ashanti, Newcrest Mining, Ployment International and others.

How to Buy Index Funds in 4 Simple Steps!

Here is a quick and simple guide to investing in different index funds with globally regulated broker Admirals.

In fact, you can use the same steps to invest in stocks and shares from 15 of the largest stock exchanges in the world too!

Step 1: Open an Admirals Invest.MT5 account

With an Admirals Invest.MT5 account you can invest in nearly 4,000 different stocks and ETFs from stock markets all around the world including the United States, United Kingdom, Australia, Japan and a wide range of European countries including Germany, Netherlands, France, Switzerland and many others.

You can open an account with only €1 and enjoy low commissions of just $0.01 per share for US stocks with the lowest minimum transaction costs in the industry at just $1!

Furthermore, you can:

  • Access FREE real-time market data
  • Receive complementary Dow Jones Newswires
  • Invest from state of the art trading platform, MetaTrader 5
  • Build a potential passive income stream with a portfolio of dividend paying stocks

Index Funds Sign Up

Step 2: Deposit funds into your wallet

With Admirals, you can deposit funds commission-free using a wide range of different methods which includes bank transfer, Visa/MasterCard, Klara and PayPal, as well as many other commission-based methods.

Most methods have instant processing times so you can start investing straight away!

Index Funds Deposit and Withdrawals Admirals

Step 3: Choose your investment and invest!

You can invest from the MetaTrader 5 desktop trading platform or from the MetaTrader 5 Web platform. Either way, the platform is simple to use and easily accessible. You can also search for all the different instruments available to invest directly from the platform too, just follow these steps below:

1. Login to the Admirals online Trader’s Room

2. Click Trade to open the MetaTrader 5 web platform

3. Right click in the Market Watch window and select Symbols to search all the instruments available to invest in, as shown below. Select your instrument and click show to add it to your Market Watch list.

Index Funds MetaTrader 5

Source: MetaTrader 5 Web, 20 May 2021

4. To view a live price chart, drag the symbol from the Market Watch window onto the chart. You can view different timeframes and add on different technical trading indicators.

5. To open a trading ticket, right click on the chart, select Trading and then New Order. This enables you to input your trade size and any associated orders like stop loss levels which is useful to risk protect your investments as you can still lose money in an index fund if you close at a loss.

How to Supercharge your Investing Platform

You can supercharge your investing platform by upgrading your MetaTrader 5 platform to the MetaTrader 5 Supreme Edition version completely FREE!

This plugin allows you to access the Technical Insight Lookup indicator which provides actionable trading and investing ideas on thousands of different instruments including index funds, commodities, stocks, currencies and more.

For example, if you were searching for investing ideas on the Vanguard S&P 500 UCITS ETF, all you need to do is type it into the search bar and the indicator will provide you with all the current technical events forming!

Index Funds Admirals MT5 Supreme Edition

Source: Admirals MetaTrader 5 Supreme Edition, 20 May 2021

From the screenshot above, the indicator has found 19 different technical events taking place on the price action of the Vanguard S&P 500 UCITS ETF. This covers short-term, intermediate-term and long-term setups.

An explanation of the investing idea and technical analysis formation is found at the bottom and is detailed to help you pick up advanced technical analysis skills. There is also a small chart to visualise the pattern forming.

This can be a great addition to your investing arsenal and you can download it completely FREE by clicking on the banner below:

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Conclusion

Index funds have seen a huge interest in demand in recent years. They are also becoming even more specialised allowing investors to access regions of the world otherwise closed to them.

The very meaning of index funds allows you to track the performance of a broad index tracking a stock market or commodity. This provides a unique way to passively build a diversified portfolio.

However, it’s important to invest with a regulated broker that offers low commissions. You can test all of the services and features provided by Admirals completely FREE by opening a demo trading account.

Click on the banner below and get started today!

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About Admirals (formerly Admiral Markets)

Admirals is a multi-award winning, globally regulated Forex and CFD broker, offering trading on over 8,000 financial instruments via the world's most popular trading platforms: MetaTrader 4 and MetaTrader 5. Start trading today!

This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or recommendation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

Jitanchandra Solanki
Jitanchandra Solanki
Financial Markets Author, Admirals London

Jitanchandra is a financial markets author with more than 15 years experience trading currencies, indices and US equities. He is an accredited Market Technician with a BA Hons degree.