Index funds are fairly inexpensive compared with other types of mutual funds, making them an attractive option for most investors. S&P 500 index funds can help you instantly diversify your portfolio by providing exposure to some of the biggest companies in the U.S.
What is an S&P 500 index fund?
An S&P 500 index fund tracks the S&P 500, a market index that measures the performance of about 500 U.S. companies.
Index funds, by definition, aim to mirror a particular market index, such as the Dow Jones Industrial Average, the Nasdaq Composite Index or the S&P 500. Since they contain largely the same investments, an index fund will likely perform similarly to how the overall market index performs.
This does mean that when the S&P 500 (or any other index) enters periods of historic volatility like we saw in April, that volatility will show up in your investment gains or losses, too. But remember: Index funds like the ones below are long-term investments. If you can tune out the noise, refrain from panic-selling and stay committed to your plan, you don't have to fear the shocking headlines.
» Looking for ETFs instead? See our list of the top S&P 500 ETFs
3 of the best S&P 500 index funds
The best S&P 500 index fund for you will depend on its minimum investment, costs and how closely it aligns to the S&P 500 market index.
Ticker | Fund name | Expense ratio |
|---|---|---|
FXAIX | Fidelity 500 Index Fund | 0.015% |
SWPPX | Schwab S&P 500 Index Fund | 0.020% |
VFIAX | Vanguard 500 Index Fund Admiral Shares | 0.040% |
Source: Morningstar. Data is current as of July 10, 2026, and is intended for informational purposes only. | ||
» Want to get started investing in index funds? Check out the best online brokerage accounts for beginners. These brokers offer low costs, great educational resources and a wide selection of beginner-friendly investments.
How to choose the fund that's right for you
While most S&P 500 index funds will have similar holdings, they may vary in terms of their fees, such as expense ratios. Expense ratios are annual fees you pay to help cover a fund’s expenses. If you invest in a fund with a 0.25% expense ratio, you’ll pay $2.50 annually for every $1,000 invested. That may not sound like much, but if your account balance grows, so will that fee.
Consider 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. If a fund is only a few years old, it's hard to know how it would perform in a different type of market (though past performance does not indicate future performance).
A fund’s AUM can give you a sense of the size of a fund. If a fund has a relatively high AUM, it can indicate that the fund may be more stable in volatile markets.
How to get started investing in the S&P 500
You cannot invest in the S&P 500 itself. S&P 500 index funds are one option for investing in the S&P 500. You could also invest in the individual stocks represented in the S&P 500, but that would be much more work because you’d have to monitor the performance of each individual stock yourself.
If you’re ready to get started investing in either S&P 500 index funds or individual company stocks, you’ll need to first open a brokerage account. You'll need to have a little bit of your financial information on hand, but beyond that, these are very simple to set up.
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Why are S&P 500 index funds popular?
S&P 500 index funds are popular in part because they can instantly diversify a portfolio. With a single asset, you are invested in 500 of the largest companies in the U.S., covering many types of industries and sectors.
How many S&P 500 index funds do I need?
S&P 500 index funds will be nearly identical to one another in terms of their performance and their holdings, or the particular stocks held within the fund. Investing in multiple S&P 500 index funds will not necessarily further diversify your portfolio. Depending on the fund, some index funds will invest in a small portion of an index, while others may track the entire index. Be sure to look at a fund’s holdings to know exactly how close your fund is tracking its benchmark index.
If you have one index fund and want to diversify further, you could consider exploring index funds that cover other market indexes, such as the Dow Jones or Nasdaq.
What’s the difference between S&P 500 index funds and S&P 500 ETFs?
S&P 500 funds, whether index funds or ETFs, both track the S&P 500. The biggest difference between them is that exchange-traded funds (ETFs) can be traded throughout the day like stocks, while index funds can only be bought and sold at the price set at the end of the trading day.
If you’re investing for the long term — meaning you’re buying and holding the funds for five years or more — this difference won’t matter much. However, ETFs are generally more tax-efficient than index funds.
Frequently Asked Questions
Is the S&P 500 the best index to invest in?
The S&P 500 offers investors a lot of diversification (it contains hundreds of companies) and also a lot of clout (all of its components are large-cap stocks). There are other indexes to consider if you want to focus on one of those qualities. A Russell 2000 index fund will contain thousands of small-cap stocks, while a Dow Jones Industrial Average index fund will contain just a few dozen blue-chip stocks.
Do I need anything in my portfolio besides S&P 500 index funds?
Investing solely in one S&P 500 index fund might be a bit too minimalist for many people, but there are popular simple portfolios that only consist of a few index funds.
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