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The 5 Best Index Funds to Buy

The best ETFs are often pegged to big-name indices

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Best Index Fund #3: iShares Russell 2000 ETF (IWM)

best index funds iwmWhile the SPY and QQQ primarily help you get your large-cap fix, what about small-cap stocks? After all, even Apple was a startup once, and investors gobbled up fantastic returns as it shot up from a small-cap stock to America’s most valuable company. Naturally, investors want to harness this kind of growth potential … but not everyone is comfortable trying to play these individual companies, which often fall below the media spotlight, making information and analyst coverage scarce. The iShares Russell 2000 ETF (IWM) is the best index fund to fix that problem. The Russell 2000 is the most popular benchmark for small-cap stocks, and IWM is by far and away the most popular Russell 2000 ETF. The index is primarily made up of small-cap stocks — the average market cap for holdings is $1 billion — though a few fall into the midcap range of $2 billion to $10 billion. Because of the nature of small-cap stocks — namely, to be able to rapidly rise or decline in value — top holdings frequently change. Current top holdings for the iShares Russell 2000 ETF include biotech InterMune (ITMN), regional bank Prosperity Bancshares (PB), and software maker Aspen Technology (AZPN). IWM charges just 0.24% in expenses.

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