The one-size-fits-all index fund

July 4, 8:02 PMSF Personal Finance ExaminerBarbara Bryn Klare

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MUTUAL FUND SCORECARD: The S&P 500 index fund

A low-cost mutual fund that's one-size-fits-all? Yes, it can happen. It is possible to pay the SAME fund fees as institutional investors, if you shop around.

San Francisco-based Charles Schwab recently announced it has cut fund fees on its equity index funds. And that means for everyone, big or small. According to the CEO, Walt Bettinger, "... by reducing our fund expenses and simplifying the fees, more all investors of all sizes and types can plan for a brighter future." I researched popular index funds, using S&P index funds as a guide at other brokers to see if the announcement holds water. I believe it does.

I looked at over 20 finds and checked the minimum investment and the expense ratio (or ER) as factors in judging the funds. The ER is the operating costs, including management fees, expressed as a percentage of the fund's average net assets. Basically, the ER is your price tag for holding the fund. For example, on a $10,000 investment, a1.2% ER would mean $120 of expenses is deducted out of the fund's returns before you get anything.The ER does not include brokerage costs and various other transaction costs that may also contribute to a fund's total expenses.  

It came down to three. Here's the lineup:
1--Schwab S&P 500 |  SWPPX | Min. Investment = $100 | Net Expense Ratio (after waivers) = .09% - the ratio is the same for both Investor Shares (SWPIX) and regular SWPPX)
Comments: low minimum and truly one-size-fits-all; the ER is the same for all investors

2-- Fidelity Spartan S&P 500 | FSMKX | Min. Investment =  $10,000 | Expense Ratio = .10%
Comments: Next lowest ER, but the minimum investment is too high

3--Vanguard Index Trust 500 Index | VFINX (Investor Shares) | Min. Investment = $3,000 | Expense Ratio = .15 - .18% [I've seen it listed as .15 but their site currently lists  as .18%]
Comments: better ER than most, but the minimum investment is high

E*TRADE no longer offers an S&P 500-based index fund. Their old one, ETPSX, is no longer open to new investors.

So if you have a $100 or even a couple of thousands to invest, the Schwab Equity Index fund (SWPPX) will fit your wallet AND your budget.

I say: Invest responsibly. Remember, brokerage products are not FDIC-insured and may lose value.

DISCLOSURE: I am a long-term Schwab client but do not currently hold any shares of SWPPX.

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