Index funds are a low-fee, no-fuss way to invest money. It might be the smartest and easiest investment you ever make.

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Everyone gushes about index mutual funds, and for good reason: Theyre an easy, hands-off, diversified, low-cost way to invest in the stock market.

When investors buy an index fund, they get a well-rounded selection of many stocks in one package without having to purchase each individually. And because these funds simply hold all the investments in a given index versus an actively managed fund that pays a professional to do the stock picking management fees tend to be low. The result: Higher investment returns for individual investors.

Lastly, index funds are easy to buy. Heres how its done.

Look at a brokers fund selection, commission-free options and trading costs.

Funds may track well-known indexes like the S&P 500 or specific industries or types of companies.

You can purchase an index fund directly from a mutual fund company or a brokerage. Same goes for exchange-traded funds (ETFs), which are like mini mutual funds that trade like stocks throughout the day (more on these below).

» Want to cut to the chase?See our picks forbest brokers for mutual funds.

When youre choosing where to buy an index fund, consider:

Do you want to purchase index funds from various fund families? The big mutual fund companies carry some of their competitors funds, but the selection may be more limited than whats available in a discount brokers lineup.

Find  a single provider who can accommodate all your needs

For example, if youre just going to invest in mutual funds (or even a mix of funds and stocks), a mutual fund company may be able to serve as your investment hub. But if you require sophisticated stock research and screening tools, a discount broker that also sells the index funds you want may be better. (If you dont have a brokerage account,heres how to open one.)

. If the commission or transaction fee isnt waived, consider how much a broker or fund company charges to buy or sell the index fund. Mutual fund commissions are higher than stock trading ones, about $20 or more, compared with less than $10 a trade for stocks and ETFs.

Do they offer no-transaction-fee mutual funds or commission-free ETFs? This is an important criterion we use to rate discount brokers. (The selections at Charles Schwab, E-Trade, Fidelity and TD Ameritrade are worth checking out.)

» Interested in exchange-traded funds?Check out ourbest brokers for ETFs.

Index mutual funds track various indexes. The Standard & Poors 500 index is one of the best-known indexes because the 500 companies it tracks include large, well-known U.S.-based businesses representing a wide range of industries.

But the S&P 500 isnt the only index in town. There are indexes and corresponding index funds composed of stocks or other assets that are chosen based on:

. Index funds that track small, medium-sized or large companies  (also known as small-, mid- or large-cap indexes).

These funds focus on stocks that trade on foreign exchanges or a combination of international exchanges.

Funds that focus on consumer goods, technology, health-related businesses, for example.

Funds that track domestic and foreign bonds, commodities, cash.

Emerging markets or other nascent but growing sectors for investment.

Despite the array of choices, you may need to invest in only one. His Royal Investment Highness Warren Buffett has said that the average investor need only invest in a broad stock market index to be properly diversified. (For more, check out our story onsimple portfolios to get you to your retirement goals.)

» Looking for other ways to invest?Heres our guide to investing in stocks.

However, you can easily customize your allocation if you want additional exposure to specific markets in their portfolio (such as more emerging market exposure, or a higher allocation to small companies or bonds).

Low costs are one of the biggest selling points of index funds. Theyre cheap to run because theyre automated to follow the shifts in value in an index. However, dont assume that all index mutual funds are cheap.

Even though theyre not actively managed by a team of well-paid analysts, they carry administrative costs. These costs are subtracted from each fund shareholders returns as a percentage of their overall investment.

» Want help building your investment plan?Check out ourtop picks for robo-advisors.

Two funds may have the same investment goal   like tracking the S&P 500 yet have management costs that can vary wildly. Those fractions of a percentage point may seem like no big deal, but your long-term investment returns can take a massive hit from the smallest fee inflation. Typically, the bigger the fund, the lower the fees.

The minimum required to invest in a mutual fund can run as high as a few thousand dollars. Once youve crossed that threshold, most funds allow investors to add money in smaller increments.

This is different than the investment minimum. Although a brokerages account minimum may be $0 (common for customers who open a traditional or Roth IRA), that doesnt remove the investment minimum for a particular index fund.

This is one of the main costs are subtracted from each fund shareholders returns as a percentage of their overall investment. Find the expense ratio in the mutual funds prospectus or when you call up a quote of a mutual fund on a financial site.

For context, the average annual expense ratio was 0.09% for stock index funds and 0.07% for bond index funds, versus 0.82% for actively managed stock funds and 0.58% for actively managed bond funds, according a 2016 report from the Investment Company Institute.

owning the fund may trigger capital gains taxes if held outside tax-advantaged accounts like a 401(k) or an IRA. Like the expense ratio, these taxes can take a bite out of investment returns: typically 0.3% of returns when invested in an index fund, according to a 2014 study by Vanguard founder John Bogle. Fund tracker Morningstar calculates the tax-cost ratio, which shows the percentage by which a funds performance has been reduced by taxes.

Here are three options from our analysis of thebest brokers for fund investors:

Index funds have become one of the most popular ways for Americans to invest because of their ease of use, instant diversity and returns that typically beat actively managed accounts. Some additional things to consider:

Your index fund should mirror the performance of the underlying index. To check, look at the index funds returns on the mutual fund quote page. It shows the index funds returns during several time periods, compared with the performance of the benchmark index.

Dont panic if the returns arent identical. Remember, those investment costs, even if minimal, affect results, as do taxes. However, red flags should wave if the funds performance lags the index by much more than the expense ratio.

nvest in an exchange-traded fund that tracks the index. Instead of having to buy the main-course mutual fund, you purchase just a slice of the fund. (Here are some

pros and cons of investing in ETFs versus mutual funds

Learn how to trade stockswith these step-by-step instructions

This guide to thebest online stock brokers for beginning investorswill help.

Use our retirement calculator to track your progress.

» RIP, John Bogle:Investing wisdom from the father of the index fund

Dayana is a NerdWallet authority on retirement and investing. Her work has been featured by Forbes, Real Simple, USA Today, Womans Day and The Associated Press.Read more

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