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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