If you want to invest in the stock market without spending hours researching individual stocks, S&P 500 index funds are the perfect solution. You get instant exposure to 500 of the largest companies in the United States, all in one investment.
I’m going to break down the five best S&P 500 index funds you can buy right now and help you figure out which one fits your investing approach.
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Why S&P 500 Index Funds Work
Here’s the thing about index funds that track the S&P 500 – they’re not trying to beat the market. They’re designed to match it. And that’s actually the smart play for most investors.
The S&P 500 index holds 500 of America’s largest companies across every major sector of the economy. We’re talking about the tech giants, healthcare companies, financial institutions, consumer brands, energy stocks, industrial companies – basically the core of the U.S. stock market. When you buy an S&P 500 index fund, you own small pieces of all these companies.
These index funds use something called market capitalization weighting. That means bigger companies take up more space in the fund. Apple might represent 7% of the fund’s assets while smaller companies in the S&P 500 index might only be 0.01%. The fund managers don’t pick and choose – they just match whatever the index does.
Over long periods of time, the stock market has delivered solid investment returns. The S&P 500 has averaged around 10% annual returns since it expanded to 500 stocks back in 1957.1 Some years you lose money. Other years you make 20% or more. But across decades, investing in index funds tracking the broad market has helped millions of investors build wealth.
The beauty of these funds is simplicity. You don’t need to analyze companies, read earnings reports, or time the market – which is exactly why Warren Buffett’s 2-fund portfolio relies on S&P 500 index funds as its foundation. You invest money regularly, reinvest your dividends, and let compound growth do the heavy lifting.
How to Choose an S&P 500 Fund
Since every S&P 500 index fund owns the same 500 stocks, the differences come down to a few key factors.
Expense ratios matter more than you think. The expense ratio is the annual fee you pay to own a fund, that is automatically deducted from your investment overtime. A fund charging 0.03% takes $3 annually from every $10,000 you invest. One charging 0.10% takes $10. That gap might seem tiny, but over 30 years of investing, those extra fees can cost you tens of thousands of dollars in lost returns.
ETFs versus mutual funds changes how you invest. Exchange traded funds (ETFs) trade on stock exchanges like individual stocks. You buy shares at market prices during trading hours. Mutual funds only price once per day after markets close, and you can invest exact dollar amounts instead of buying whole shares. Neither is better – it depends on how you like to invest.
Tracking error shows how closely the fund matches the index. No fund perfectly replicates the S&P 500’s performance because of fees and tiny timing differences. Quality index funds keep tracking error minimal – usually just a few basis points per year.
Tax efficiency varies between fund structures. ETFs generally have better tax efficiency than mutual funds because of how they handle investor redemptions. This matters more in taxable brokerage accounts than in IRAs or 401k accounts where you’re not paying taxes on gains until withdrawal. While there is likely no significant impact from low turnover index mutual funds, understanding the difference is important.
1. Fidelity 500 Index Fund (FXAIX)
If you’re looking for the absolute lowest expense ratio on an S&P 500 mutual fund, FXAIX is hard to beat.
Expense ratio: 0.015%
Minimum investment: $0
Type: Mutual fund
Best for: Fidelity investors, anyone who wants rock-bottom expenses
Fidelity cut expenses on this fund to just 0.015% – that’s $1.50 per year on every $10,000 invested.2
There’s no minimum investment required. You can start with $50 if that’s what you’ve got. This makes FXAIX perfect for investors who want to dollar cost average with small regular contributions.
The fund tracks the S&P 500 by holding all 500 stocks. Portfolio turnover stays low around 3% annually, which helps keep costs down. As a mutual fund, FXAIX settles once per day. You can invest exact dollar amounts instead of buying whole shares.
Fidelity includes FXAIX in thousands of employer 401k plans. If your workplace retirement account is through Fidelity, this fund probably offers no transaction fees.
The fund pays quarterly dividends you can reinvest automatically. With over $730 billion in assets, Fidelity’s scale helps keep operating expenses minimal for investors.
2. Vanguard S&P 500 ETF (VOO)
VOO is one of the most popular S&P 500 ETFs on the market – ultra-low expenses from a company known for putting investors first.
Expense ratio: 0.03%
Minimum investment: 1 share (fractional shares often available)
Type: ETF
Best for: ETF investors seeking low costs
Vanguard charges 0.03% for VOO, which equals $3 annually per $10,000 invested.3
VOO trades on stock exchanges during market hours. Most major brokers offer commission-free ETF trading, so you’re only paying that tiny annual expense ratio.
The fund holds all 500 companies in the S&P 500 using full replication. ETFs like VOO have better tax efficiency than mutual funds in taxable accounts through in-kind redemptions. This avoids the chance of triggering capital gains, which is unlikely for low turnover index mutual funds like FXAIX.
VOO has over $829B in assets under its management (AUM). VOO is one of our best Vanguard ETFs to own for life alongside VTI and VUG. That massive size provides excellent liquidity for easy buying and selling. The fund pays quarterly dividends with yields around 1.3% annually that your broker can automatically reinvest.
3. Schwab S&P 500 Index Fund (SWPPX)
Schwab’s S&P 500 mutual fund combines extremely low expenses with easy access for Schwab clients.
Expense ratio: 0.02%
Minimum investment: $0
Type: Mutual fund
Best for: Schwab clients, automatic investing
SWPPX charges 0.02% annually – just $2 per year on every $10,000 invested.4 If you already invest with Schwab, this fund offers no transaction fees and easy automatic investing.
The fund’s share price sits around $17. Lower share prices let you own more shares with the same dollar amount, which some investors prefer. SWPPX has operated since 1997 with consistent index tracking.
Portfolio turnover runs about 2% annually, keeping trading costs low. The fund works in taxable accounts, IRAs, and 401k plans. Many Schwab workplace retirement plans include SWPPX as their S&P 500 option.
4. iShares Core S&P 500 ETF (IVV)
BlackRock’s IVV provides another ultra-low-cost ETF backed by one of the world’s largest investment companies.
Expense ratio: 0.03%
Minimum investment: 1 share (fractional shares often available)
Type: ETF
Best for: ETF investors seeking low costs
IVV matches VOO’s 0.03% expense ratio.5 BlackRock’s massive scale lets them run IVV efficiently at rock-bottom costs.
Launched in 2000, IVV has over 20 years of performance data showing close index tracking. The fund holds over $730 billion in assets with high trading volume that keeps bid-ask spreads tight.
As an ETF, IVV minimizes capital gains distributions through in-kind redemptions. In taxable accounts, this tax efficiency saves money. The fund holds all 500 stocks with market cap weighting that rebalances automatically.
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5. SPDR S&P 500 ETF Trust (SPY)
SPY is the first ETF ever launched in the United States back in 1993. It sees massive trading volume but charges more than newer competitors.
Expense ratio: 0.0945%
Minimum investment: 1 share (fractional shares often available)
Type: ETF (Unit Investment Trust)
Best for: Active traders, options traders
SPY costs 0.0945% annually – about three times more than VOO or IVV.7 On $100,000, you’re paying roughly $95 per year versus $30 for cheaper funds.
Why choose SPY? Liquidity. This fund trades over 80 million shares daily with extremely tight bid-ask spreads. SPY also has the most active options market of any ETF.
The fund operates as a unit investment trust, which creates limitations. SPY can’t reinvest dividends immediately and can’t lend securities to generate additional revenue.
For buy-and-hold investors, SPY’s higher expenses outweigh liquidity benefits. But for active traders, the superior liquidity justifies the cost. The fund has over $700 billion in assets.
Comparing Options
Here’s how these five funds stack up:
Fund | FXAIX | VOO | SWPPX | IVV | SPY |
Type | Mutual fund | ETF | Mutual fund | ETF | ETF |
Launch Year | 1988 | 2010 | 2004 | 2000 | 1993 |
Assets Under Management (AUM) | $738B | $829B (#1 Largest ETF) | $132B | $762B | $709B |
Expense Ratio | 0.015% | 0.03% | 0.02% | 0.03% | 0.0945% |
10-Yr Average Return (11/30/2025) | 14.62% | 14.58% | 14.59% | 14.59% | 14.48% |
Key Advantage | Lowest expense (Fidelity) | Available on nearly any brokerage | Schwab investors | Available on nearly any brokerage | Maximum liquidity for active traders |
The honest truth? For most long term investors, the differences between FXAIX, VOO, SWPPX, and IVV don’t matter much. They’ll all deliver nearly identical performance because they own the same 500 stocks and charge minimal fees.
Pick FXAIX if you want the absolute lowest expense ratio and already use Fidelity. Choose VOO or IVV if you prefer the flexibility of ETFs and the “safer” tax efficiency in taxable accounts. Go with SWPPX if you’re already using Charles Schwab. Skip SPY unless you’re actively trading.
How Expenses Impact Your Wealth
Here’s why these tiny expense differences matter.
On a $100,000 investment over 30 years at 10% returns, the gap between 0.015% expense and 0.0945% expense costs you nearly $38,000. That money came straight from your pocket to pay higher fund expenses instead of staying invested and compounding.
Even tiny expense ratio differences create massive wealth gaps over time. This chart shows what happens to $100,000 invested in each S&P 500 index fund over 30 years, assuming the historical average return of 10% annually before fees.
Important Insights
Fidelity’s FXAIX has the lowest annual fee at a 0.015% expense ratio. Based on a consistent example, this would have computed the best outcome on the list, turning $100,000 into $1,737,816 after 30 years.
Charles Schwab’s SWPPX deliver nearly identical results from its 0.02% expense. The fund turned $100,000 into $1,735,447 over 30 years.
VOO and IVV cost you $7,096 more over three decades compared to FXAIX. That’s just 0.4% of your final wealth—negligible for most investors.
SPY’s higher fees cost you $37,292 compared to FXAIX over 30 years. That’s real money lost to expenses, not market performance. SPY makes sense for active traders who need liquidity, but for buy-and-hold investors, those extra fees add up.
Small differences compound dramatically. A 0.0795% gap between FXAIX (0.015%) and SPY (0.0945%) doesn’t sound like much. But over 30 years, that tiny difference becomes $37,292 in lost wealth. This is why paying attention to expense ratios matters so much for long-term investing.
Analysis Note
Calculations assume 10% average annual return (the historical S&P 500 average) before fees, compounded annually over 30 years. Actual returns will vary based on market performance. Past performance does not guarantee future results.
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What You’re Actually Buying
When you invest in an S&P 500 index fund, you’re buying small pieces of 500 companies. The biggest positions include tech giants like Apple, Microsoft, Nvidia, Amazon, and Alphabet. These large cap growth stocks represent huge portions of the index because of market cap weighting.
You also own healthcare companies, financial institutions, consumer brands, industrial companies, energy stocks, and everything else across all sectors. The S&P 500 covers about 80% of the total U.S. stock market.
These funds pay dividends quarterly, with current yields around 1.3% annually. You can reinvest them to buy more shares or take the cash.
How to Get Started
Here’s how to actually invest in these funds.
First, you need a brokerage account. If you already have one, great. If not, opening an account takes about 10 minutes online. Fidelity, Charles Schwab, and other major brokers all offer commission-free trading on ETFs and mutual funds.
Once your account is funded, search for the fund ticker – FXAIX, VOO, SWPPX, IVV, or SPY. New to ETF investing? Read our complete guide on how to invest in ETFs step-by-step. For mutual funds like FXAIX and SWPPX, you can invest exact dollar amounts. For ETFs like VOO and IVV, you buy shares at current market prices (though many brokers now support fractional share investing for ETFs too).
Set up automatic investments if you can. Investing $500 every month regardless of market conditions helps smooth out volatility over time. You’ll naturally buy more shares when prices drop and fewer when prices rise. This strategy, called dollar cost averaging, takes emotion out of investing decisions.
The key to building wealth through index funds is staying invested. The stock market goes through regular corrections and occasional bear markets. These temporary declines feel awful when you’re living through them. But investors who stay invested typically recover and reach new highs.
If you’re investing in a taxable brokerage account, lean toward ETFs like VOO or IVV for better tax efficiency. If you’re investing in an IRA or 401k where taxes don’t matter until withdrawal, the fund structure doesn’t matter as much – just pick the lowest expense ratio available.
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The Bottom Line
You’ve got five excellent options here. FXAIX charges the least. VOO and IVV offer ETF tax efficiency at rock-bottom costs. SWPPX works great for Schwab clients. SPY provides unmatched liquidity for active traders.
For most investors building wealth over decades, FXAIX makes the most sense if you’re using Fidelity, VOO if you want an ETF structure, or SWPPX if you’re with Schwab. The expense differences between these three are so tiny they barely affect long term returns.
What matters more than your specific fund choice? Starting to invest, investing regularly, and staying invested through market cycles. Pick one of these funds, set up automatic contributions, and let compound growth work over time.
The S&P 500 index funds give you a simple, low-cost way to invest in America’s largest companies. You don’t need complicated investment strategies or expensive financial advice. You just need patience and discipline.
Open an account. Pick a fund. Start investing. That’s it.
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