The is a market-capitalization-weighted index of 500 large-cap U.S. companies that make up 80% of U.S. equities by market cap. It is widely regarded as the best gauge of large-cap U.S. equities and is often referred to as the market because it is comprised of stocks that span all market sectors. Some of the S&P 500's largest components include:
- Microsoft (MSFT)
- Apple (AAPL)
- Amazon (AMZN)
- Alphabet (GOOGL)
- Tesla (TSLA)
There are many funds whose stock portfolios are designed to track those of the S&P 500 due to the index's popularity as a barometer of U.S. equity markets, including mutual funds and exchange-traded funds (ETFs). ETFs differ from mutual funds because they are listed on exchanges and traded throughout the day like ordinary stocks.
Below we look at the top S&P 500 index funds, one with the lowest fees and the other with the highest liquidity. All data below is as of Feb. 15, 2023.
Key Takeaways
- Index investing has been gaining momentum over the past decade, with passive funds often outperforming their active counterparts for a lower cost.
- Among index investors, the S&P 500 has been the most widely watched benchmark index to track.
- The index is widely considered a barometer of the U.S. large-cap equity market.
- Investors may want to consider index funds offered by Fidelity, Schwab, Vanguard, and State Street.
- State Street has a viable ETF option that tracks the performance of the S&P 500.
Lowest Cost S&P 500 Index Fund: Fidelity 500 Index Fund (FXAIX)
FXAIX is a mutual fund. Because index-tracking funds will follow the performance of the index, one of, if not the, biggest determinant of long-term returns is how much it charges in fees.
- Expense Ratio: 0.015%
- 2022 Return: -18.13%
- Yield: 1.33%
- Assets Under Management (AUM):$373.8 billion
- Minimum Investment: $0
- Inception Date: Feb. 17, 1988 (Share Class Inception Date: May 4, 2011)
- Issuing Company: Fidelity
Lowest Cost Runner Up: Schwab S&P 500 Index Fund (SWPPX)
Schwab's S&P 500 index fund seeks to track the total return of the S&P 500 Index. The fund generally invests at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in these stocks. The actual percentage is typically considerably higher. It generally will seek to replicate the performance of the index by giving the same weight to a given stock as the index does.
- Expense Ratio: 0.02%
- 2022 Return: -18.13%
- Yield: 1.35%
- AUM:$60.8 billion
- Minimum Investment: $0
- Inception Date: May 19, 1997
- Issuing Company: Charles Schwab
Lowest Cost Runner Up: Vanguard 500 Index Fund Admiral Shares (VFIAX)
Vanguard was the original index fund and still has the largest assets under management, with over $792.6 billion in its Vanguard 500 Index Fund Admiral Shares, as of Jan. 31, 2023. The investment seeks to track the performance of a benchmark index that measures the investment return of large-capitalization stocks. The fund employs an indexing investment approach designed to track the performance of the Standard & Poor's 500 Index.
- Expense Ratio: 0.04%
- 2022 Return: -18.15%
- Yield: 1.58%
- AUM:$792.6 billion
- Minimum Investment: $3,000
- Inception Date: Nov. 13, 2000
- Issuing Company: Vanguard
As with any investment, make sure you do your research before purchasing any mutual funds or ETFs. If you have any doubts, consult a financial professional you can trust to help guide you in the right direction.
Lowest Cost Runner Up: State Street S&P 500 Index Fund Class N (SVSPX)
Also in the running is State Street's offering, which also closely tracks the S&P 500 Index. This fund, however, requires a minimum investment of $10,000.
- Expense Ratio: 0.16% (net)
- 2021 Return: 28.54% (most recent available)
- Yield: 1.76%
- AUM:$1.3 billion
- Minimum Investment: $10,000
- Inception Date: Dec. 30, 1992
- Issuing Company: State Street
Most Liquid S&P 500 Index Fund: SPDR S&P 500 ETF (SPY)
SPY is an ETF, not a mutual fund, and it's not even the lowest-cost S&P 500 ETF. It is, however, the most liquid S&P 500 fund. Liquidity indicates how easy it will be to trade an ETF, with higher liquidity generally meaning lower trading costs. Trading costs are not a big concern to people who want to hold ETFs long-term, but if you’re interested in trading ETFs frequently, then it’s important to look for high-liquidity funds to minimize trading costs.
- Expense Ratio: 0.09%
- 2022 Return: 18.14%%
- Yield:1.56%
- AUM: $382.1 billion
- Minimum Investment: $464.68
- Inception Date: Jan. 22, 1993
- Issuing Company: State Street
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FAQs
Top S&P 500 index funds in 2024
| Fund (ticker) | 5-year annual returns | Expense ratio |
|---|
| Vanguard S&P 500 ETF (VOO) | 14.5% | 0.03% |
| SPDR S&P 500 ETF Trust (SPY) | 14.5% | 0.095% |
| iShares Core S&P 500 ETF (IVV) | 14.5% | 0.03% |
| Schwab S&P 500 Index (SWPPX) | 14.5% | 0.02% |
4 more rowsApr 5, 2024
Is an S&P 500 index fund a good investment? As long as your time horizon is three to five years or longer, an S&P 500 index fund could be a good addition to your portfolio. However, any investment can produce poor returns if it's purchased at overvalued prices.
What happens if you invest $100 000 in the S&P 500? ›
If you take your $100,000 and put it in an S&P 500 index fund, you could end up with over $1 million within 24 years if the index produces returns in line with its historical average. If you keep saving, you can get there even faster.
What index funds does Dave Ramsey recommend? ›
Ramsey recommends investing in four types of mutual funds: growth and income funds, growth funds, aggressive growth funds, and international funds.
Is spy better than voo? ›
Over the long run, they do compound—those fee differences—and investors have been putting a lot more money into VOO versus SPY. That is the reason why we view VOO slightly better than SPY. And that is just the basic approach, which is the lower the investor can pay, the better the investment is.
What is the most profitable index funds? ›
- Vanguard 500 Index Fund Admiral Shares (VFIAX)
- Schwab S&P 500 Index Fund (SWPPX)
- Fidelity 500 Index Fund (FXAIX)
- Fidelity Zero Large Cap Index (FNILX)
- T. Rowe Price Equity Index 500 Fund (PREIX)
- Invesco NASDAQ 100 ETF (QQQM)
- Invesco QQQ (QQQ)
- Fidelity NASDAQ Composite Index Fund (FNCMX)
Over the past decade, you would have done even better, as the S&P 500 posted an average annual return of a whopping 12.68%. Here's how much your account balance would be now if you were invested over the past 10 years: $1,000 would grow to $3,300. $5,000 would grow to $16,498.
Why you shouldn't just invest in the S&P 500? ›
That's because your investment gives you access to the broad stock market. Meanwhile, if you only invest in S&P 500 ETFs, you won't beat the broad market. Rather, you can expect your portfolio's performance to be in line with that of the broad market.
Why is the S&P 500 not a good investment? ›
The S&P 500 weighting system gives a small number of companies major influence, which could have an undue negative effect on the index if one or a few of them run into trouble. The index does not expose investors to small or emerging companies with the potential for market-beating growth.
How to turn 100k into 1 million? ›
There are two approaches you could take. The first is increasing the amount you invest monthly. Bumping up your monthly contributions to $200 would put you over the $1 million mark. The other option would be to try to exceed a 7% annual return with your investments.
How To Turn $1,000 Into $10,000
- Retail Arbitrage.
- Invest In Real Estate.
- Invest In Stocks & ETFs.
- Start A Side Hustle.
- Start An Online Business.
- Invest In Alternative Assets.
- Learn A New Skill.
- Try Peer-to-Peer Lending.
Investing $1,000 per month for 5 years through a systematic investment plan could have you end up with $83,156.62.
Does Warren Buffett believe in index funds? ›
Buffett has said that he believes the average U.S. investor should regularly put their money into an S&P 500 index fund, and he's bet that the S&P 500 will outperform the average actively managed fund in the long run.
Do the rich buy index funds? ›
Warren Buffett might be the world's most famous investor, and he frequently touts the benefits of investing in low-cost index funds. In fact, he's instructed the trustee of his estate to invest in index funds.
What is the 4 rule for index funds? ›
One frequently used rule of thumb for retirement spending is known as the 4% rule. It's relatively simple: You add up all of your investments, and withdraw 4% of that total during your first year of retirement. In subsequent years, you adjust the dollar amount you withdraw to account for inflation.
Is the S&P 500 Index Fund a good investment now? ›
If you're buying a stock index fund or almost any broadly diversified stock fund such as one based on the S&P 500, it can be a good time to buy if you're prepared to hold it for the long term. That's because the market tends to rise over time, as the economy grows and corporate profits increase.
What are the best S&P 500 stocks to buy? ›
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| Company (ticker) | Analysts' consensus recommendation score | Analysts' consensus recommendation |
|---|
| Amazon.com (AMZN) | 1.29 | Strong Buy |
| Nvidia (NVDA) | 1.33 | Strong Buy |
| Microsoft (MSFT) | 1.33 | Strong Buy |
| Bio-Techne (TECH) | 1.39 | Strong Buy |
21 more rowsConsider looking for S&P 500 index funds with low expense ratios, several years of operation and a healthy amount of assets under management (AUM). The longer a fund has existed, the more information you have about its performance history.
Is Vanguard S&P 500 a good investment? ›
The Vanguard S&P 500 ETF (VOO 0.68%) is one of the best ways to invest in the S&P 500, which has been a pretty smart strategy over the long term. Since 1965, the S&P 500 has produced a total return of 10.2% annualized. The Vanguard ETF has an expense ratio of just 0.03%, so you get to keep most of your gains.
