Top index funds over the past 10 years

The year 2022 was grim for most investors, as stocks everywhere dipped, except in the energy sector, which had a banner year.

The S&P 500 posted a nearly 20% decline, its first negative return since 2018. Likewise, last year brought no joy for most equity index funds, popular vehicles synonymous with low-cost investing for the masses.

The happier news: Some index funds with double-digit declines last year are sitting pretty over 10 years. It’s a testament to the power of ignoring potholes and sticking to the long term.

Index funds follow a particular gauge or benchmark, with the goal of replicating that standard’s performance. They can passively track a plain vanilla, ready-made indicator, such as the S&P 500. Or they can follow a bespoke list, with a fund manager actively choosing a basket of stocks and a specific investing technique, such as shorting (betting that a stock’s price will fall) or swaps (derivatives that involve trading one security’s or index’s cash flows for another). 

Read more: The top-performing U.S. ETFs of 2022

Index funds come as mutual funds and exchange-traded funds, the latter trading just like stocks. Those with a direct indexing bent of tracking a bespoke benchmark are poised to grow at a faster clip than basic ETFs, mutual funds and separate accounts — a fancy term for a portfolio of individual securities — and will reach more than $800 billion in assets by 2026, according to Cerulli Associates. 

Direct indexing usually costs more; after all, a fund manager has to get paid to try to select the winners. Still, Fidelity Investments said last June that it would allow Main Street investors to create custom indexes and put money in their chosen underlying stocks, with no account minimum and a flat $4.99 monthly fee.

Scroll through the slideshow of the 20 top-performing index funds over 10 years. All data is from Morningstar and covers Jan. 1, 2013, through Dec. 31, 2022.