S&P 500 index funds allow you to invest in the Standard & Poor’s 500 Index, a collection of stocks that includes America’s largest and most successful companies. The S&P 500 index has delivered an average return of about 10 percent per year over time, making it an attractive investment.
Here are the best S&P 500 index funds, including mutual funds and exchange-traded funds.
Top index funds from the S&P 500 in 2024
| Fund (ticker) | Annual return over 5 years | Cost ratio | Minimal investment |
|---|---|---|---|
| Source: Morningstar, as of April 4, 2024 | |||
| Fidelity ZERO Large Cap Index (FNILX) | 14.6% | 0% | No |
| Vanguard S&P 500 ETF (VOO) | 14.5% | 0.03% | No |
| SPDR S&P 500 ETF Trust (SPY) | 14.5% | 0.095% | No |
| iShares Core S&P 500 ETF (IVV) | 14.5% | 0.03% | No |
| Schwab S&P 500 Index (SWPPX) | 14.5% | 0.02% | No |
| Vanguard 500 Index Fund (VFIAX) | 14.5% | 0.04% | $3,000 |
| Fidelity 500 Index Fund (FXAIX) | 14.5% | 0.015% | No |
Each of these funds tracks the S&P 500 index, so it’s no surprise that they earn essentially the same annual return over the same five-year period. The small difference is mainly due to fees, with the no-fee Fidelity ZERO exchange-traded fund (ETF) only slightly outpacing the field and the slightly more expensive SPDR S&P 500 fund only a quarter step behind.
Which S&P 500 Index Fund Should You Buy?
Because these funds all track the same index, which S&P 500 fund you should buy depends on other important factors, such as expense ratio and minimum investment.
Any way you look at it, these funds are cheap, even if some are cheaper than others. For example, the Vanguard S&P 500 ETF charges an annual fee of 0.03 percent. That works out to $3 for every $10,000 invested in the fund. None of the other funds are much more expensive. In fact, S&P 500 index funds are among the cheapest on the market – well below the average cost of a fund.
If you choose the Fidelity ZERO fund – which charges no expense ratio – you should know that this can be done by avoiding the S&P brand and its associated fees. While the fund tracks this important index effectively—in fact, it does a little better—Fidelity can’t say it’s an S&P 500 fund.
The funds also compete well on minimum investment, which can be a key factor for mutual funds but not ETFs. Three of the four mutual funds here have no minimum, while the Vanguard 500 fund has a standard minimum of $3,000. There is no effective minimum investment for an ETF, but you may need to buy at least one full share, and ETF prices vary considerably. But if you work with one of the best fractional share brokers, you can buy in for just a few dollars.
Finally, it’s worth noting that not all mutual funds are available from all brokers. For example, the free Fidelity ZERO fund may not appear as an option with most brokers. So if you want that fund specifically, you may need to open a Fidelity brokerage account.
It’s also incredibly easy to buy an S&P 500 index fund. Here you can read how to invest in a fund.
Should you invest in an S&P 500 index fund?
The main benefits of an S&P 500 index fund are that investors can earn strong returns over time, even if they have little investing experience. The S&P 500 contains approximately 500 stocks of the top U.S. companies, and each share of an index fund gives investors indirect ownership of all the companies – all for a low annual fee.
These index funds provide instant diversification, reducing the risk of investing in individual stocks. Although investing is never without risk, the S&P has a strong long-term track record. Still, it can be volatile in the short term. Therefore, experts routinely recommend that investors should invest for at least three years and ideally longer to achieve attractive returns.
Because of these important benefits, legendary investor Warren Buffett has long recommended that most investors invest in an S&P 500 index fund rather than in individual stocks.
In short
S&P 500 index funds are among the best investments for investors of all levels, but they can be especially beneficial for newer investors, who can enjoy solid returns without the need for extensive expertise. Investors have a variety of low-cost options to earn those tasty returns.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making any investment decision. In addition, investors are advised that the past performance of investment products does not guarantee future price increases.
