An index fund lets you own hundreds of companies in a single purchase. You don't pick winners. You buy the whole market, or a big slice of it, and pay very little to do it.
That simplicity is why index funds have become the starting point for so many investors. Vanguard's S&P 500 ETF (NYSE Arca: VOO) became the first ETF to pass $1 trillion in assets in June 2026.
This guide covers what index funds are, how to choose one, and how to start from the UAE, India, Nigeria or anywhere else, from as little as $1 with Nemo.money app.
Key takeaways
- An index fund tracks a market index, like the S&P 500, instead of trying to beat it.
- Fees matter most. The biggest S&P 500 ETFs charge 0.03% to about 0.09% a year.
- Most investors outside the US buy index funds as ETFs, which trade like a stock.
- You can start small. Fractional shares mean you don't need the full share price.
What is an index fund?
An index fund is a fund that copies a market index. If the index holds 500 companies, the fund holds the same 500, in roughly the same proportions.
An index is just a list with rules. The S&P 500 is around 500 of the largest US-listed companies. The Nasdaq-100 is 100 of the largest non-financial companies on the Nasdaq. A total world index covers thousands of companies across developed and emerging markets.
Because nobody is picking stocks, the running costs stay low. Those savings go back to you.
Index fund vs ETF: what's the difference?
An index fund can come in two wrappers.
- Index mutual fund: bought directly from the fund company, priced once a day, often with a minimum investment.
- Index ETF: traded on a stock exchange during market hours, like a share. Usually no minimum beyond the price of one share, or less with fractional shares.
For most investors outside the US, ETFs are the practical choice. They're easier to access through an investing app. New to ETFs? Start with our explainer on what an ETF is.
How to invest in index funds: 5 steps
- Decide what you want to own. The US large-cap market (S&P 500), US tech-heavy growth (Nasdaq-100), or the whole world (total world index). This choice matters more than which fund provider you use.
- Compare the fees. Look at the expense ratio, the yearly cost as a share of your investment. 0.03% means $3 a year on every $10,000.
- Check what it tracks and how closely. A good index fund follows its index tightly. Big, well-known funds with lots of trading volume tend to do this best.
- Open an account with an investing app or broker. Look for access to US-listed ETFs, fractional shares and low or zero commission.
- Choose how often to invest. Many people invest a set amount each month. This spreads out your entry price and builds a habit.
Popular index funds to research
These are examples to research, not recommendations.
- S&P 500 (US large caps): VOO, IVV and SPY each hold around 500 of the biggest US companies. VOO and IVV charge 0.03% a year; SPY charges 0.0945%.
- Total world: VT spreads your money across around 10,000 companies in developed and emerging markets, for 0.06% a year.
- Nasdaq-100 (US tech-heavy): QQQ holds around 100 of the largest non-financial companies on the Nasdaq, for 0.20% a year.
Want to go deeper on the S&P 500? Read our full guide: What Is VOO? The $1 Trillion S&P 500 ETF, Explained. Choosing between the US and the world? See VOO vs VT and how to choose.
Investing in index funds from the UAE, India or Nigeria
You don't need to live in the US to own US index funds. Most US-listed ETFs are open to international investors through a regulated broker or investing app.
A few things to check before you start:
- Currency. US ETFs trade in US dollars. If you earn in AED, INR or NGN, currency moves will affect your returns.
- Dividends and tax. Many index ETFs pay dividends. US withholding tax may apply, and the rate depends on where you live.
- Regulation. Use a provider regulated in a recognised jurisdiction.
How to start with Nemo.money
On Nemo.money, you can research and invest in eligible US-listed stocks and ETFs from $1, with zero commission (subject to availability). Uninvested cash earns 6% AER, paid daily in USD.
- Download the app and open your account.
- Add funds.
- Search for an ETF, such as VOO or VT.
- Choose your amount, from $1, and confirm.
The risks to know
- Index funds go down with the market. When the S&P 500 falls 20%, an S&P 500 fund falls about 20% too.
- Concentration. The S&P 500 is weighted by size. Its top 10 holdings make up roughly 38% of the index.
- Currency risk for anyone not earning in US dollars.
- No guaranteed returns. Index funds have no protection against loss.
Frequently asked questions
How do I start investing in index funds with little money? Use an app that offers fractional shares. On Nemo.money you can invest in US-listed ETFs from $1 with zero commission.
Are index funds good for beginners? Many beginners start with them because they are diversified, low-cost and need little upkeep. Whether they suit you depends on your goals and how long you can stay invested.
What is the cheapest S&P 500 index fund? As of October 2026, VOO and IVV charge 0.03% a year, SPY about 0.09%, and SPYM 0.02%.
Can I invest in index funds from the UAE? Yes. UAE residents can buy US-listed index ETFs through a regulated broker or investing app, including Nemo.money, from $1 with zero commission.
How many index funds should I own? Many investors keep it to one or two. A total world fund already holds about 10,000 companies, so adding more can overlap.
Nemo = Never Miss Out. Stay informed. Stay ahead.
Terms and conditions apply. This is not investment advice. Past performance is not indicative of future results. Your capital is at risk. See website for Risk Disclosure. Exinity ME Ltd (https://nemo.money) is regulated by ADGM's Financial Services Regulatory Authority.
