2025's Best Index Funds & ETFs for Smart Passive Growth

Editor: Kirandeep Kaur on Jun 30,2025

 

As more investors get financially educated and conscious about money, the best index funds and ETFs for passive investing in 2025 are front and center in every savvy investor's playbook. With the rising awareness of financial freedom and low-cost investing, passive investing strategies are as sought-after as they ever have been. In the first 100 words, we will show you the lowest-cost ETFs US investors are big on, how S&P 500 index funds compare to other ETFs and index funds, and why the best index funds are as important as ever for creating long-term wealth.

This guide is for those investors who want to build their portfolios with regular, low-cost exposure to the market, without day-to-day trading stress/concern.

Why Use Index Funds and ETFs in 2025?

As we head into the year 2025, the pressure from market volatility and inflation concerns is driving more investors to passive strategies. Investors are turning to index funds and ETFs, which have the lowest fees, allow for a hands-off portfolio solution, and closely track the market's performance without the stress of feeling like you have to constantly trade to follow the market. The value of having fewer surprises and the predictability of market performance allows for a simple but strong path to long-term growth. Index funds and ETFs focus on long-term growth, making them perfect for first-time investors or seasoned investors who want a way to overcome uncertain markets.

Key Reasons to Choose the Best Index Funds:

  • Low Costs: Expense ratios are usually noted below 0.10%.
  • Diversification: Vastly dispersed across numerous sectors or the total market.
  • Transparency: Holdings are evident and predictable.
  • Long Term Growth: Best for a buy-and-hold approach.

So, in summary, the best index funds will grow your money relatively slowly and in a very low-maintenance or no-maintenance way.

Top S&P 500 Index Funds for Reliable Market Exposure

s-and-p-500-index-funds

If you want to track the top 500 U.S. companies, S&P 500 index funds are a core investment. You get broad diversification upon purchase, and it will almost mimic the market.

Best Picks for 2025:

1. Vanguard 500 Index Fund (VFIAX)

  • Expense Ratio: 0.04%
  • Minimum Investment Rate: $3,000

Reason it's good: One of the longest-running and stable funds with consistent performance.

2. Fidelity 500 Index Fund (FXAIX)

  • Expense Ratio: 0.015%
  • Minimum Investment: None
  • Why It's Great: Low cost, great for new investors.

3. Schwab S&P 500 Index Fund (SWPPX)

  • Expense Ratio: 0.02%
  • Minimum Investment: None
  • Why It's Great: Very competitive fee schedule and strong reputation.

Each of these S&P 500 index funds has performed wonderfully in the past and is an ideal example of how the top index funds make portfolio management easy.

Low-Cost ETFs USA Investors Ought Not Miss

ETFs (exchange-traded funds) are a more efficient vehicle for passive investors because ETFs have flexibility and access that mutual funds do not. ETFs trade on the major exchanges like common stocks, which means ETFs provide better pricing via real rates, are more liquid, and have lower expense ratios.

For passive, longer-term investors with less expense in mind, ETFs are much more attractive vehicles. With ETFs being a diversified investment vehicle providing exposure to sectors, indexes, and asset classes, low expense ratios; and the emergence of financial tech tools to monitor their portfolio performance, passive investors will only continue to expand their investment choices in 2025 and beyond. Listed below are some low-cost ETFs USA investors are using in 2025:

1. Vanguard Total Stock Market ETF (VTI)

  • Expense Ratio: 0.03%
  • Coverage: All of the U.S. stock market
  • Best For: Diversification in one ETF.

2. iShares Core S&P Total U.S. Stock Market ETF (ITOT)

  • Expense Ratio: 0.03%
  • Coverage: Large, mid, small-cap U.S. stocks
  • Why It's Special: Global market coverage at bare-bones cost.

3. SPDR Portfolio S&P 500 ETF (SPLG)

  • Expense Ratio: 0.02%
  • Theme: Follows the S&P 500 index
  • Best suited for: Buy and hold long-term strategy.

Low-cost ETFs in the USA provide a tax-efficient, low-cost path for investors who are liquidity- and control-conscious.

The Power of Buy and Hold Strategy

Of the most powerful strategies in 2025 is the traditional buy-and-hold approach. It perfectly supports the character of top index funds and ETFs, where investments increase with time without the interference of emotional choice-making.

Advantages of Buy and Hold:

  • Avoids market timing mistakes
  • Lessens tax occurrences
  • Lessens trading commissions
  • Maximizes compound interest

Combined with S&P 500 index funds or the best Vanguard ETFs, this strategy can bring potentially strong long-term results with diminished risk compared to active trading.

Best Vanguard ETFs to Monitor in 2025

The best Vanguard ETFs have been industry leaders for decades. Low cost and far-reaching exposure make them perfect for creating a well-diversified passive portfolio.

Recommended Vanguard ETFs:

1. Vanguard S&P 500 ETF (VOO)

  • Tracks the S&P 500
  • Ultra-low 0.03% expense ratio
  • Trusted by seasoned investors and beginners alike

2. Vanguard Total Bond Market ETF (BND)

  • Provides bond exposure across all maturities
  • This is a great diversifier to have alongside some equity ETFs

3. Vanguard FTSE Developed Markets ETF (VEA)

  • Provides exposure to international markets
  • This is a great way to diversify beyond U.S. equities

All of these great Vanguard ETFs are easily suited for a buy-and-hold strategy, especially over the long term when you are aiming for passive growth.

Passive Investing 2025: What's New?

Passive investing in 2025 has evolved into advanced methodologies, mostly with the help of technology, more transparency, and expanding toolsets. The core premise persists: efficiency, diversification, and low cost. Nevertheless, recent developments are enabling passive investing to be implemented more easily than ever before:

Some recent developments:

  • Robo-advisors are providing customized portfolios through the best index funds.
  • Zero-commission trading is making ETFs more accessible.
  • Fractional shares are allowing investors to put capital into the best ETFs and funds.
  • Passive investing in 2025 is easier than ever, and it is also the most equal opportunity for people to build wealth.

Sample Portfolio: Start Smart in 2025

If you're ready to get started, below is a sample passive portfolio of the best index funds and ETFs for passive investing in 2025:

  • VOO (Vanguard S&P 500 ETF) - 40%
  • VTI (Vanguard Total Stock Market ETF) - 30%
  • VEA (Vanguard Developed Markets ETF) - 15% 
  • BND (Vanguard Total Bond Market ETF) - 15%

This portfolio provides a good distribution between domestic & international equities, and fixed income exposure, and operates under a long-term buy and hold investing strategy.

How to Get Started with Passive Investing in 2025

Step-by-Step Guide:

  • Open a Brokerage Account

Select platforms such as Fidelity, Vanguard, Schwab, or Robinhood.

  • Define Your Goals

Are you saving for retirement, college, or general wealth?

  • Choose Your Allocation

Blend low cost USA ETFs and S&P 500 index funds according to your risk profile.

  • Automate Investments

Utilize auto-deposits and DRIPs (Dividend Reinvestment Plans) so you're not behind.

  • Stick With It

In summary, passive investment in 2025 is all about being patient and disciplined. The focus is going to be on long-term growth via diversified index funds and ETFs. You will allow your portfolio to take a back seat and grow on its own, while you don't tinker with it.

Final Thoughts: Let Your Money Work For You

The future of building riches is not dynamic day trading—it is the gentle force of passive investing. The best index funds and ETFs for passive investing in 2025, as a new investor or an experienced investor, will generate wealth over a long period of time with no high fees or emotional feelings.

By investing in USA low-cost ETFs, quality S&P 500 index funds, and Vanguard ETFs that rank best year to year, you are now investing with someone else's money in the form of a buy-and-hold investment style that has been proven to work over the years.

So, make 2025 the year that you make your finances easier and "let your money work for you," slowly, surely, and smartly.


This content was created by AI