Aiming to Grow Your Savings? Here are 14 Best Low-Cost Index Funds to Invest in for Long-Term Growth

Everyone dreams of financial freedom, but it’s often easier said than done.

Many people assume they need a significant amount of capital or a keen understanding of the stock market to start investing. However, there’s a simpler, proven approach that requires neither deep pockets nor expert knowledge — low-cost index funds. Backed by decades of research and endorsed by seasoned investors like Warren Buffett, these funds have consistently outperformed many actively managed portfolios. By simply tracking the performance of broad market indices, they offer a reliable way to grow your wealth with minimal fees and reduced risk. This makes them an attractive option, especially for those looking to invest for the long term without the stress of constant market monitoring.

In this guide, we will explore the 14 best index funds that can set you on the path to sustainable financial growth.

Why Low-Cost Index Funds Are the Smartest Way to Maximise Your Returns?

Low-cost index funds are a game-changer for long-term investors aiming to build wealth efficiently.

Unlike actively managed funds, they come with minimal fees, meaning more of your money is actually working for you instead of being eaten up by management costs. And here’s why that matters: over time, even a small difference in fees can significantly impact your returns, especially when compounded over decades.

Imagine two investors, each starting with $100,000. One chooses a low-cost index fund with a 0.05% annual fee, while the other goes for an actively managed fund charging 1.5%. Fast forward 30 years, assuming an average return of 7% per year: the index fund investor would have over $758,000, while the actively managed fund investor would end up with just $498,000. That’s a staggering $260,000 difference, solely due to higher fees. Vanguard’s research highlights how these seemingly small costs can quietly drain your potential earnings over time. In fact, multiple studies, including those by Morningstar, have shown a strong link between lower fees and better fund performance. Simply put, keeping costs down isn’t just smart — it’s essential for maximising your long-term returns.

That’s because the money saved on fees is reinvested, compounding and growing your wealth more effectively. By keeping costs down, you’re essentially giving yourself a head start, especially during market downturns where every percentage point counts. In short, choosing low-cost index funds can be one of the smartest decisions you make for your financial future.

The takeaway here is simple: the less you pay in fees, the more you keep, and over the long run, that difference can add up to tens of thousands of pounds.

For ease of reading, I have separated them into 7 different categories.

1. Maximise Growth with S&P 500 Index Funds

S&P 500 index funds are the gold standard for investors seeking steady, long-term growth.

These funds focus on the largest 500 companies in the U.S., offering a slice of the most profitable businesses. What’s more, they have consistently delivered strong returns over the past few decades, with an average annual return of around 10% according to historical data from Standard & Poor’s.

By choosing low-cost options, you can retain more of your profits over the years:

• Fidelity 500 Index Fund (FXAIX)

  Expense Ratio: 0.015%

• Schwab S&P 500 Index Fund (SWPPX)

  Expense Ratio: 0.02%

Keeping fees low is crucial because even small cost savings can significantly impact your total returns.

2. Diversify Globally with International Stock Funds

If you want to spread your investment net beyond the U.S., international index funds are the way to go.

They give you exposure to companies from both developed and emerging markets, which helps diversify your portfolio against economic downturns in any one region. According to Morningstar, diversifying internationally can enhance your portfolio’s resilience while still capturing growth opportunities. Here are two excellent low-cost options:

• Vanguard Total International Stock Index Fund (VTIAX)

  Expense Ratio: 0.11%

• Fidelity ZERO International Index Fund (FZILX)

  Expense Ratio: 0.00%

This global approach allows you to participate in the growth of fast-expanding markets without breaking the bank on fees.

3. Leverage Industry Trends with Thematic Investing

If you’re looking to align your investments with future growth sectors, thematic funds are a powerful tool.

Technology continues to dominate, but clean energy is emerging as one of the hottest sectors to watch, driven by global efforts to combat climate change. In fact, governments worldwide are committing to ambitious green initiatives, with the International Energy Agency projecting a 40% increase in clean energy investments by 2030. For those interested in tapping into the potential of these high-growth industries, consider these funds:

• Invesco QQQ ETF (QQQ) (Focused on tech-heavy Nasdaq stocks)

  Expense Ratio: 0.20%

• iShares Global Clean Energy ETF (ICLN) (Invests in renewable energy companies poised to benefit from the clean energy revolution)

  Expense Ratio: 0.40%

By investing in these sectors, not only do you align with the trends shaping our world, but you also position your portfolio for robust growth.

4. Tap into Growth Potential with Small-Cap Funds

Small-cap funds are ideal for investors looking to capitalise on the growth potential of smaller companies. These stocks tend to outperform larger companies over the long term, especially in early bull markets, as per historical trends reported by Morningstar. Here are two cost-effective funds in this category:

• Vanguard Small-Cap Index Fund (VSMAX)

  Expense Ratio: 0.05%

• iShares Russell 2000 ETF (IWM)

  Expense Ratio: 0.19%

These funds focus on companies that are agile and often under the radar, providing a great opportunity for outsized returns.

5. Expand Your Horizons with Emerging Markets Funds

Emerging markets are the engines of future global growth, and investing in them can supercharge your portfolio.

According to McKinsey, emerging markets are projected to account for nearly two-thirds of global GDP growth by 2030. To capture this potential, consider these funds:

• Vanguard FTSE Emerging Markets ETF (VWO)

  Expense Ratio: 0.08%

• iShares MSCI Emerging Markets ETF (EEM)

  Expense Ratio: 0.69%

By investing in these funds, you’re positioning yourself to benefit from the rapid expansion of these economies, all while keeping costs low.

6. Stabilise Your Portfolio with Bond Funds

Bonds provide stability and reduce volatility in your portfolio, especially during market downturns.

According to Fidelity, maintaining a bond allocation can protect against stock market drops and provide steady income. Here are two top low-cost options:

• iShares Core U.S. Aggregate Bond ETF (AGG)

  Expense Ratio: 0.03%

• Vanguard Total Bond Market Index Fund (VBTLX)

  Expense Ratio: 0.05%

These funds focus on high-quality bonds, which means less risk and more predictable returns.

7. Hedge Against Uncertainty with Alternative Investments

Alternative investments like real estate and gold can offer a hedge against inflation and market volatility.

According to Goldman Sachs, both gold and real estate tend to perform well during inflationary periods. Consider these funds to diversify beyond stocks and bonds:

• SPDR Gold Shares ETF (GLD)

  Expense Ratio: 0.40%

• Vanguard Real Estate Index Fund (VGSLX)

  Expense Ratio: 0.12%

Including these funds in your portfolio ensures you’re not overly reliant on traditional markets, providing extra security in uncertain times.

What’s next?

In the end, the smartest path to building wealth isn't chasing the hottest stock or timing the market — it's investing in low-cost index funds that deliver steady, long-term growth.

By keeping your costs down and diversifying across different sectors and markets, you’re setting yourself up for sustainable financial success. If you’re serious about growing your wealth, these funds are the proven, no-nonsense strategy to get you there.

Don't let high fees and market hype derail your future — stick to what works, and watch your investments grow.