What are deciding factors what that some of you look at when comparing different index funds?
Good question.
The absolute last thing I would look at is the YTD performance. One should choose a index fund to serve a specific purpose in a portfolio, not to chase recent returns. If you need help with that, try browsing these popular
portfolios.
But assuming you're trying to choose a fund to track a particular index, here's what I would consider:
First, I like to look at the rules for the index that the index fund is tracking. Not every index is created the same, so make sure you know what you're buying.
Next, you should look at whether it's a mutual fund or an ETF. Mutual funds allow you to simply put in however much money you want and trade after hours, while ETFs require you to purchase set numbers of shares during normal trading hours. Personally I prefer ETFs because I like the control and they tend to be a little more tax efficient than mutual funds due to how they manage capital gains.
Beyond that, the other two things I look for are the expense ratio and the trading volume. Obviously lower fees are better. The trading volume is important for ETFs because funds with low volumes 1) may take a while to execute trades, and 2) have higher spreads between the bid and ask price. Low spreads are better and save you money. Personally, I wouldn't invest in an ETF that doesn't have a trading volume of at least a few hundred thousand shares per day.
And finally, be sure to look at the transaction costs for a particular fund at your brokerage. Many brokerages have normal fees of about $5 per trade, which (as little as I trade) does not stop me from investing in funds I prefer over less desirable no-transaction-fee alternatives. However, some brokerages charge large fees for investing in mutual funds not run by the same brokerage. For example, I invest through Fidelity but like Vanguard's stock funds. It would cost me $5 to purchase VTI but $75 to purchase VTSMX. Note that they track the exact same index, but the first is an ETF and the second is a mutual fund. So obviously I go with VTI.
I hope that helps!