Index funds have become a popular way for people to invest in the financial markets without holding individual stocks. They are commonly used by investment advisors, including robo-advisors. That’s because each index fund can represent an entire asset class, industry, financial market, or geographic region. Just by investing in an index fund, you’ll have full diversification within each sector.
For that reason, we’ve compiled what we believe to be the 10 best brokerages for index funds. Though most are brokerages, we’ve also included a few investment platforms that primarily invest in index funds. That will give you the best possible choice among index fund investment options.
We’ll be using “index funds” and “ETFs” interchangeably. That’s because index funds are most commonly ETFs, or exchange traded funds.
Mutual funds can be index funds, and occasionally are. But more commonly, mutual funds are actively managed. That means a fund manager will actively trade securities within a mutual fund in an attempt to outperform the underlying market.
This is also why investing in index funds is important. Index funds don’t actively trade. That translates into lower investment expenses, which improves the long-term performance of the fund.
Instead, an index fund tracks an underlying market index. This could be a broad index, like the S&P 500, or more specific indexes that track industries or geographic regions. For example, an index fund may tie its composition to an index that represents airlines, healthcare, energy, or high tech. Similarly, it can also be constructed to match an index representing a geographic region, like Latin America, Japan, the European Union, or emerging markets.
Those specializations give you the ability to choose which markets and industries you want to invest in. You can achieve full diversification in each by investing in a single fund.
Index funds are becoming increasingly popular among professional investors because they generally outperform actively managed funds. Just by tracking the general market, index funds have
widely outperformed actively managed funds on a consistent basis.
That’s why you need to consider investing in index funds, and why our list of the 10 best brokerages for index funds can help.
We’ve evaluated each of the 10 brokerages based on objective criteria, as well as what makes each unique.
If you look for the brokerage that has the services you want and the unique niche you prefer, it’s likely you’ll find the right one for you.
Best for: Low-fee and no-fee ETFs.
Why Fidelity is a good brokerage for index funds: Fidelity offers what is perhaps the largest number of low-fee and no-fee ETFs. That can improve the performance of your funds because the lower the expense ratios within each, the higher your net investment return will be. And though that improvement may be small, it can really add up over a 20- or 30-year investment time horizon.
You can open an account with no money at all, and invest in virtually every type of investment, including ETFs. And if you don’t want to manage your own investments, you can choose the Fidelity Go robo-advisor. It even offers no advisory fee on the first $9,999 managed. And overall, Fidelity is an industry leader in almost every investment brokerage category.
Best for: Customer service.
Why Charles Schwab is a good brokerage for index funds: Charles Schwab consistently scores at or near the top of the brokerage industry in customer service. It’s available by both phone and live chat, 24 hours a day, seven days per week.
This brokerage also scores high in investment tools, research, and educational resources. In that way, it can accommodate investors of all experience levels.
And while Schwab is best known for self-directed investing, they also offer their Charles Schwab Intelligent Portfolios robo-advisor in case you want at least some of your investments professionally managed at low cost.
Best for: Foreign investors.
Why Firstrade is a good brokerage for index funds: Firstrade certainly allows you to invest in ETFs, along with just about every other type of investment there is. Not only does that include 11,000 commission-free mutual funds, but also penny stocks—if you have an interest in those.
But where Firstrade stands out on this list of the best brokerages for index funds is in their ability to accommodate foreign investors. These are not to be confused with foreign nationals living in the U.S., but foreigners living in their home countries. This is an important capacity, too. Most brokerages don’t offer accounts for foreigners, but Firstrade does. That will give foreign investors an opportunity to invest in the large and diverse U.S. financial markets.
Best for: ETFs and day trading.
Why Webull is a good brokerage for index funds: Webull is one of a fast-growing number of investment apps that make investing fast, inexpensive, and an activity that can easily be done on the go. One of the best indications of how successful Webull has been at streamlining the investment process—and cost—is that they are particularly strong in the area of day trading.
Now, you may not be interested in day trading, particularly if index fund investing is your preference. But in case you are, Webull can be the perfect trading platform to engage in day trading while investing in index funds. (And it’s also worth noting that some day traders do work with index funds.) And for even more diversified investment opportunities, Webull also allows you to invest in cryptocurrencies.
You’ll need at least intermediate investing skills to get the best use out of this app. It’s light on investment tools, research, and education resources, and customer service is limited to email only.
Best for: ETFs and cryptocurrency investing.
Why Robinhood is a good brokerage for index funds: Much like Webull, Robinhood is a brokerage app that emphasizes speed, simplicity, and low cost. And like other brokerages on this list, Robinhood charges no commissions on trading stocks, options, and ETFs. However, Robinhood does allow you to invest in cryptocurrencies right alongside index funds.
Robinhood is another investment app that will work best for experienced investors. Like Webull, it has very limited investor resources and customer support.
Best for: Diversified financial platform.
Why SoFi Invest is a good brokerage for index funds: SoFi is best known for refinancing student loans, and they’re one of the very best in the business in that capacity. But since SoFi caters specifically to recent college graduates—which is only natural with student loan refinances—they’ve also expanded to provide all types of financial services. This includes providing personal, auto, and home loans, as well as various types of insurance. And we’re including them on our list because they also provide investment services.
SoFi only recently rolled out its brokerage service, SoFi Active Investing. It requires no minimum initial investment to open an account and allows you to invest in ETFs and individual stocks commission-free. You can also invest in cryptocurrencies on the platform.
But if you prefer to have at least some of your investments professionally managed, you can do that through SoFi Automated Investing. That’s SoFi’s robo-advisor service. They’ll create a portfolio for you, then manage it at no cost. Your money will be invested in index-based ETFs selected by the service.
Now we’re going to look at some non-brokerages where you can also invest in index funds.
Best for: A robo-advisor that lets you choose your own ETFs.
Why M1 Finance Expert Pies is a good brokerage for index funds: M1 Finance Expert Pies isn’t a brokerage, but it may be the very best non-brokerage to invest in index funds with. Instead, it’s a robo-advisor that allows you to choose your own ETFs—and individual stocks—and then have them professionally managed by the service. That makes M1 Finance Expert Pies an investment hybrid, sitting somewhere between a brokerage and a robo-advisor. And they’ll manage your investments free of charge!
M1 Finance Expert Pies allows you to create individual portfolios, referred to as “pies.” Each pie is its own portfolio and can hold up to 100 ETFs and individual stocks. You can either choose from one of 80 prebuilt pies or create your own pie theme. Either way, you can choose the securities that will be held in your pie. You can also create an unlimited number of pies, all of which will be managed for you, including periodic rebalancing.
Best for: Human-guided wealth management at half the price.
Why Personal Capital is a good brokerage for index funds: Personal Capital isn’t a brokerage at all, but an investment management service. It works more like traditional, human-guided investment advisors, but at a much lower cost. You’ll be provided with a diversified portfolio that will include multiple asset classes. Each will include index funds and/or individual stocks, as well as other types of securities.
Because it is an investment management service, the minimum account size is $100,000. That will not only give you investment management, but also access to financial advisors. And with at least $200,000 to invest, you’ll get a dedicated personal financial advisor.
Best for: Low cost, hands-off investment management.
Why Betterment is a good brokerage for index funds: Betterment is a robo-advisor and offers no brokerage services. However, they will create a diversified portfolio for you, and provide complete investment management at a very low cost.
The reason it’s an excellent way to invest in index funds is that your portfolio allocations will be invested entirely in index-based ETFs. It’s the perfect choice for someone who wants to invest in index funds but doesn’t want to choose or manage them.
Best for: Fractional shares.
Why Public is a good brokerage for index funds: Most brokerages accommodate investments in fractional shares. But Public specializes in them. They even have a special name for them, referring to them as “slices.” Instead of buying an entire high-priced stock, you can instead invest in a slice of one. For example, you can buy 1/100 of a $100 stock—for just $1. And in that way, you can spread $50 across as many as 50 different stocks. This can be done even with index-based ETFs, allowing you to diversify across a large number of funds with a small amount of money.
Public also offers a social component, where you can participate in its community of traders. You can swap investment ideas and strategies, and find out what other investors are doing while you share your own progress.
If you’d like to invest in index funds—and you probably should—choose any one or a combination of the best brokerages for index funds listed in this review. That will give you the option to either choose and invest directly in index funds, or to participate in them through a professionally managed account.