Mutual funds have always been a preferred option for those seeking to invest without managing individual securities. These funds offer diversified exposure to stocks, bonds, or other assets in a bundled format. The fees you pay for such convenience, however, can significantly impact your returns over time. That’s why low-fee mutual funds continue to grow in popularity among savvy investors. With 2025 bringing a variety of options, it’s crucial to identify those that balance cost, performance, and risk. We’ll take a close look at some of the leading low-fee mutual funds, explain why management fees matter, and offer tips on selecting the right fund to suit your financial goals.

What Are Mutual Funds?

A mutual fund pools money from numerous investors to buy a broad range of assets, such as stocks, bonds, or real estate. Professional managers or automated systems decide where to allocate the pooled money. This diversification spreads out risk, making mutual funds an effective way for individuals to invest without needing deep financial expertise.

For instance, if a fund owns 50 stocks and one performs poorly, the impact on your investment is lessened because the other stocks can offset the loss. This built-in diversification makes mutual funds a favorite for both beginner and experienced investors.

Actively Managed vs. Index Funds

There are two main types of mutual funds:

Actively Managed Funds

These are overseen by professionals aiming to outperform the market by making individual investment decisions. While these funds might promise higher returns, they often come with high fees, which can erode profits over time.

Index Funds

Instead of trying to beat the market, these funds aim to replicate the performance of a market index, like the S&P 500. Because they follow a simple, automated strategy, index funds carry much lower fees. They have become especially popular because data shows that many actively managed funds fail to consistently outperform their benchmarks.

Why Do Low Fees Matter?

When you invest in a mutual fund, you pay an annual fee, commonly referred to as the expense ratio. This is a percentage of the total amount you have invested. For example, a fund with a 0.5% expense ratio means you pay $50 annually for every $10,000 invested. Though the percentage might seem small, these fees add up, especially for long-term investments.

Low fees allow a greater portion of your money to stay invested, compounding over time. This is crucial for goals like retirement or college savings, where even a slight fee difference can mean tens of thousands of dollars more in the long run. A fund with a 0.2% expense ratio will likely outperform one with a 1% fee over a 20-year period, even if their performance is similar.

We’ll go through standout low-fee mutual funds for 2025, selected for their cost efficiency and investment value.

1. Vanguard Total Stock Market Index Fund (VTSAX)

  • Expense Ratio: Approximately 0.04%
  • Best For: Broad stock market exposure
  • Pros: VTSAX provides exposure to the entire U.S. stock market, including large-, mid-, and small-cap stocks. Its ultra-low expense ratio ensures more of your money stays invested. This fund is ideal for those looking to build a solid, core investment portfolio.
  • Cons: Like most stock-focused funds, VTSAX is prone to market volatility, making it less suitable for those with low risk tolerance.

2. Fidelity ZERO Total Market Index Fund (FZROX)

  • Expense Ratio: 0%
  • Best For: Investors seeking no management fees
  • Pros: FZROX has no expense ratio, making it one of the most cost-effective options available. It offers broad exposure to the U.S. stock market, similar to VTSAX. Its fee-free structure appeals to those looking to minimize costs over the long term.
  • Cons: FZROX is exclusive to Fidelity’s platform, meaning you need an account there to invest. This may limit accessibility for some investors.

3. Schwab U.S. Aggregate Bond Index Fund (SWAGX)

  • Expense Ratio: Estimated 0.04%
  • Best For: Investors seeking conservative growth
  • Pros: This fund invests in a wide range of U.S. bonds, providing stability and reduced volatility. It's a good option for those nearing retirement or looking to add balance to a stock-heavy portfolio.
  • Cons: Bond funds typically deliver lower returns compared to equity funds. If you’re aiming for higher growth, this may not align with your goals.

4. T. Rowe Price Equity Index 500 Fund (PREIX)

  • Expense Ratio: Around 0.19%
  • Best For: Exposure to large-cap U.S. companies
  • Pros: Tracking the S&P 500, this fund provides access to the 500 largest companies in the U.S. It’s a straightforward pick for consistent, long-term growth.
  • Cons: While still considered low-cost, PREIX's expense ratio is higher than comparable funds like those from Vanguard or Fidelity.

Choosing the Right Mutual Fund

With so many options available, selecting the right mutual fund can feel overwhelming. Here are some tips to help guide your decision:

Clarify Your Goals

Are you investing for short-term stability or long-term growth? Stock-focused funds like VTSAX or FZROX are suited for long-term investors, while bond funds like SWAGX are better for conservative goals or shorter timelines.

Assess Your Risk Tolerance

Your comfort with the ups and downs of the market should guide your choice. Risk-averse investors may lean toward bond or balanced funds, while those comfortable with volatility may prefer stock-heavy options.

Focus on Fees

Always compare expense ratios across similar funds. Over time, even small differences in fees can have a significant impact on your returns.

Evaluate Past Performance

While historical data doesn’t guarantee future results, it offers insight into how a fund performs in various market conditions.

Consider Accessibility

Some funds, like FZROX, are exclusive to certain platforms. Make sure your preferred broker provides access to the fund you’re interested in.

Low-fee mutual funds serve as an excellent foundation for building wealth. With careful planning and informed decisions, low-fee mutual funds can help you achieve lasting financial success.