- 1). Consider the expense ratios and minimum investments required by Fidelity. While the company offers index funds with some of the lowest expense ratios in the mutual fund industry, these funds come with high minimum investments compared to index funds run by other companies. Fidelity requires $10,000 to purchase shares in a new index fund, while other mutual fund companies offer index funds with investment minimums in the range of $2,500 to $3,000 as of 2010.
- 2). Choose core index funds that offer full United States stock exposure. For example, the Spartan Total Market Index Fund gives you access to the entire U.S. stock market and offers an expense ratio of 0.10 percent. This compares favorably to other total stock market index funds that charge 0.18 percent and higher.
Also, the Spartan 500 Index Fund can be used as an alternate to the Spartan Total Market Index Fund. You gain exposure to fewer stocks than are represented in the total market index, but you also get the same low expense ratio of 0.10 percent while the fund tracks the performance of the S&P 500 Index. - 3). Add exposure to smaller, potentially fast-growing United States' companies. For example, the Spartan Extended Market Index Fund invests in a blend of mid-size growth and value stocks. This fund also has an expense ratio of 0.10 percent.
- 4). Diversify with an international index fund. With an expense ratio of 0.20 percent, which is among the lowest ratios available for an international fund, the Spartan International Index Fund holds the stocks of large non-U.S. companies. As of 2010, 21 percent of this fund's holdings were United Kingdom company stocks and 21 percent were Japanese company stocks.
- 5). Include a bond fund to balance your holdings. The Fidelity U.S. Bond Index Fund helps you gain broad bond exposure with an expense ratio of 0.36 percent. This is not the lowest bond fund expense ratio in the industry, but it is competitive. In exchange for your $10,000 minimum investment, you receive shares of a fund with the U.S. Treasury representing more than a third of its holdings.
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