5 Best S&P 500 Index Funds Of January 2024 (2024)

Company	Company - Logo	Expense ratio	Net assets	Minimum investment	Learn More CTA text	Learn more CTA below text	Learn More
Fidelity 500 Index (FXAIX)		0.015%	$447.4 billion	None	View More
Fidelity Flex 500 Index (FDFIX)		None	$3.7 billion	None	View More
Schwab S&P 500 Index Fund (SWPPX)		0.02%	$76.9 billion	None	View More
Vanguard 500 Index Admiral Fund (VFIAX)		0.04%	$401.3 billion	$3,000	View More
Invesco Equally-Weighted S&P 500 (VADAX)		0.53%	$2.8 billion	$1,000	View More

*Data from Morningstar Direct, current as of December 31, 2023, unless noted otherwise.

While the list of S&P 500 ETFs is fairly small and dominated by big money managers, the mutual fund universe is more crowded.

After all, it’s not terribly difficult to replicate this list of the 500 largest U.S. stocks. Every investment provider offering a 401(k) or IRA platform has an incentive to set up their own cookie-cutter vehicle rather than refer their clients—and their fees—to one of the big guys.

The challenge is that even indexed mutual funds can cost a modest amount in recordkeeping and reporting charges. So unless they have scale, most providers end up charging several times more than the cheapest options.

That’s why our list is built with a focus on scale and cost-effectiveness, including:

• A minimum of $2 billion in assets under management
• An expense ratio of less than 0.04% or less, which is just $4 annually on every $10,000 invested
• A low minimum investment threshold of no more than $3,000

The only exception to this is the “equal weight” S&P 500 fund, which is significantly more expensive but offers the feature of additional diversification. It is the only established equal-weight S&P 500 index fund available to mutual fund investors.

If you’re unclear on what an S&P 500 index fund is, it’s worth breaking down various parts of this larger term to help it make sense.

S&P Global is a major provider and manager of market data. Think of it as a company that digs into all the numbers behind stocks and other assets.

The S&P 500 index is this company’s flagship product, composed of the 500 largest U.S. companies when ranked by market value.

An index fund is a diversified investment vehicle that is locked to a fixed list of assets, or an “index.” These are passive lineups, as opposed to more active strategies that depend on a money manager trading individual positions voluntarily.

The S&P 500 is widely recognized to be the best measure of Wall Street performance. It’s not perfect, as it excludes a lot of the little guys. It also admittedly plays favorites with some sectors, with technology leading the index at 28% of the weighting while utility stocks add up to less than 3% of the total.

But if you simply want to know what’s going on in “the stock market,” the S&P 500 index is as good a proxy as you’ll find. Similarly, investing in an S&P 500 index fund is one of the simplest and most popular ways to gain exposure to Wall Street without picking individual stocks.

There are many S&P 500 index funds available in the market, so it’s important to keep a few criteria to pick the right one for your portfolio. You’ll want to think about:

• Expense ratio. As index funds are passively managed, expense ratios, which represent the fees you pay for the upkeep of your fund, should be nominal. Because all S&P 500 index funds perform very similarly, the amount you’re paying in fees becomes incredibly important when picking a fund.
• Minimum investment. Index funds have different investment minimums for taxable investment accounts and IRAs. Make sure your favorites align with the initial amount you have to invest and that you’ll be able to purchase more shares in intervals that work with your budget.
• Dividend yield. Dividends can be one of the perks of investing in large-cap companies. Be sure to compare the dividend yield between index funds as dividends could boost returns, even in down markets.
• Inception date. If you’re an investor who prefers to see a solid track record for a fund prior to investment, pay attention to the fund’s inception date. Funds with longer histories can help you see how an index fund capitalized on bull markets and mitigated losses in bear markets.

Keep in mind that you only need one S&P 500 index fund in your portfolio. The best funds post broadly similar returns that are within a few percentage points of each other, and there’s little to gain by splitting assets between two funds. If you’re truly torn between two, you could consider using one fund in your 401(k) and the other in an IRA or your taxable investment account.

You’ve got plenty of options to invest in the S&P 500. The first step is to understand how the S&P 500 stock market index works and how it can fit in with your overall investment goals. This will help you make informed decisions about your investment strategy.

• Choose an investing account. You can invest in the S&P 500 through a brokerage account, an individual retirement account (IRA) or your 401(k).
• Determine your investment strategy. Decide on how you want to invest in the S&P 500—via an ETF, an index fund or individual stocks. There are plenty of ETFs that track the performance of the index, as well as index mutual funds like the examples we list above. Alternatively, you can invest directly in individual stocks of S&P 500 companies, which requires more research and a deeper understanding of individual companies.
• Make your trades. Once you have determined your investment approach, use your investing account of choice to place your trades. Specify the number of shares or the dollar amount you want to invest.
• Monitor and rebalance your investments. Keep an eye on your investment and review it periodically. The S&P 500 is a broad index, so it’s important to ensure that your portfolio remains diversified. Rebalance your holdings if necessary to maintain your desired asset allocation.

For most people, S&P 500 index funds and ETFs are functionally the same, and you’ll want to choose whichever fund—whether index or ETF—has the lowest cost and financial minimums that make sense for your investment goals.

That said, here are a handful of differences to keep in mind:

• ETFs are generally more liquid, trading throughout the day like stocks on the exchange; you can only buy or sell index funds at one point in the day, after other trading has ended. If you’re a long-term, buy-and-hold investor, this distinction is likely not relevant.
• Management fees on ETFs can be lower than on index funds tracking the same index, but don’t assume index funds are necessarily the pricier option.
• ETF buy-ins are often much lower than minimum investments required by mutual funds.
• However, fewer brokerages allow you to purchase fractional shares of ETFs, which may make it more difficult for you to buy additional shares.
• You’re much more likely to find only index funds in an employer-sponsored retirement plan, like a 401(k).
• ETFs have a slightly better setup for managing taxes, but this is less important to consider for index-based funds that aren’t engaging in frequent trading and for funds that you’re holding in tax-advantaged retirement accounts.

Regardless of whether you pick an S&P 500 index fund or ETF, know that these funds remain a solid tool for you to access large-cap stocks for your portfolio without having to vet individual stocks. With traditionally low management fees and a wide array of investment minimums, you’ll have plenty of options that align with your assets and investment strategy.

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