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How to Invest in the S&P 500
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How to Invest in the S&P 500
The S&P 500 is a list of 500 of the leading U.S. companies, and it powers some popular index funds. Here's a step-by-step guide on how to start investing in it.
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What does it mean to invest in the S&P 500?The S&P 500 is a well-known stock market index. An index isn't an investment itself, but a list of companies that are related in some way or otherwise grouped together.
The S&P 500 is a well-known stock market index. An index isn't an investment itself, but a list of companies that are related in some way or otherwise grouped together.Contrary to popular belief, the stocks that form the index are not the 500 largest U.S. companies. However, they are arguably among the most important. The S&P 500 is one of the stock market indexes people may use to gauge the health of the overall U.S. stock market.
Contrary to popular belief, the stocks that form the index are not the 500 largest U.S. companies. However, they are arguably among the most important. The S&P 500 is one of the stock market indexes people may use to gauge the health of the overall U.S. stock market.You can't directly invest in the S&P 500 index, but you can invest in a fund — such as an index fund or exchange-traded fund (ETF) — that tracks the index. So rather than purchasing 500 individual company stocks listed in the S&P 500, you can purchase an S&P 500 fund that contains all of them at the same time.
You can't directly invest in the S&P 500 index, but you can invest in a fund — such as an index fund or exchange-traded fund (ETF) — that tracks the index. So rather than purchasing 500 individual company stocks listed in the S&P 500, you can purchase an S&P 500 fund that contains all of them at the same time. Watch our rundown of all things S&P 500 →Alana Benson, a senior writer at NerdWallet, discusses the S&P 500's historical performance, the market caps of the stocks it holds and more.
Alana Benson, a senior writer at NerdWallet, discusses the S&P 500's historical performance, the market caps of the stocks it holds and more. 06:19The easiest way to invest in the S&P 500
The easiest way to invest in the S&P 500An S&P 500 index fund or ETF is the simplest way to invest in the index. These funds aim to replicate the S&P 500's returns. Over the last century, the S&P 500 has returned about 10% per year on average, before inflation. (Tip: Use our investment calculator to see what compound returns could do for your money.)
An S&P 500 index fund or ETF is the simplest way to invest in the index. These funds aim to replicate the S&P 500's returns. Over the last century, the S&P 500 has returned about 10% per year on average, before inflation. (Tip: Use our investment calculator to see what compound returns could do for your money.)Investing in an S&P 500 fund can offer instant diversification and is generally less risky than buying single stocks directly. Because the fund tracks the performance of the S&P 500, when that index does well, your investment will, too. The opposite is also true, of course.
Investing in an S&P 500 fund can offer instant diversification and is generally less risky than buying single stocks directly. Because the fund tracks the performance of the S&P 500, when that index does well, your investment will, too. The opposite is also true, of course.To purchase S&P 500 index funds or ETFs, you'll need to open a brokerage account first. You can invest through a standard taxable brokerage account or a retirement-focused account, such as an IRA. From there, you can narrow down which fund to choose by looking at expense ratios and minimum investments.
To purchase S&P 500 index funds or ETFs, you'll need to open a brokerage account first. You can invest through a standard taxable brokerage account or a retirement-focused account, such as an IRA . From there, you can narrow down which fund to choose by looking at expense ratios and minimum investments.When you've landed on which fund to buy, depending on where you opened your account, you may be able to choose a number of shares to purchase or pick a specific dollar amount to invest. After you've placed your order, you may want to check in on your investment periodically to make sure its performance is similar to that of the S&P 500 index.
When you've landed on which fund to buy, depending on where you opened your account, you may be able to choose a number of shares to purchase or pick a specific dollar amount to invest. After you've placed your order, you may want to check in on your investment periodically to make sure its performance is similar to that of the S&P 500 index. Prefer a visual walk-through?In this video guide, NerdWallet editor Bella Avila demonstrates how to invest in an S&P 500 ETF using a self-managed brokerage account.
In this video guide, NerdWallet editor Bella Avila demonstrates how to invest in an S&P 500 ETF using a self-managed brokerage account.This is not financial advice, nor is this a recommendation of VOO, Fidelity, or any investments or strategies discussed in this video. Content is for demonstration purposes only.
This is not financial advice, nor is this a recommendation of VOO, Fidelity, or any investments or strategies discussed in this video. Content is for demonstration purposes only This is not financial advice, nor is this a recommendation of VOO, Fidelity, or any investments or strategies discussed in this video. Content is for demonstration purposes only .How much does it cost to invest in the S&P 500?
How much does it cost to invest in the S&P 500?If you are investing in an S&P 500 index fund:
If you are investing in an S&P 500 index fund:If your index fund has no minimum, you can usually purchase in any dollar amount. If your index fund has a minimum, you have to purchase at least that amount.
If your index fund has no minimum, you can usually purchase in any dollar amount. If your index fund has a minimum, you have to purchase at least that amount.If your index fund has an expense ratio, you'll be charged that as a fee. An expense ratio is an annual fee expressed as a percentage of your investment. For example, if you invest $100 and your fund has an expense ratio of 0.04%, you'll pay an annual fee of $0.04.
If your index fund has an expense ratio, you'll be charged that as a fee. An expense ratio is an annual fee expressed as a percentage of your investment. For example, if you invest $100 and your fund has an expense ratio of 0.04%, you'll pay an annual fee of $0.04.If you are investing in an S&P 500 ETF:
If you are investing in an S&P 500 ETF:ETFs trade similarly to stocks and have a share price. Depending on your broker, you will either need to pay the full share price or buy fractional shares in any dollar amount.
ETFs trade similarly to stocks and have a share price. Depending on your broker, you will either need to pay the full share price or buy fractional shares in any dollar amount.Similar to index funds, ETFs often have expense ratios, so make sure you see how much you'd be paying in fees to invest in a given ETF.
Similar to index funds, ETFs often have expense ratios, so make sure you see how much you'd be paying in fees to invest in a given ETF.If you are investing in a stock within the S&P 500 index:
If you are investing in a stock within the S&P 500 index:Stock costs vary significantly. Some stocks in the S&P 500 cost under $100, and others cost $500 a share or more. Be sure to check each stock's share price before you decide to buy. Alternatively, you can find a broker that offers fractional shares, which let you invest any dollar amount.
Stock costs vary significantly. Some stocks in the S&P 500 cost under $100, and others cost $500 a share or more. Be sure to check each stock's share price before you decide to buy. Alternatively, you can find a broker that offers fractional shares , which let you invest any dollar amount.See the S&P 500 index funds with the lowest fees
See the S&P 500 index funds with the lowest feesLearn about the most popular S&P 500 ETFs
Learn about the most popular S&P 500 ETFsSee the 25 top-performing stocks in the S&P 500 this month
See the 25 top-performing stocks in the S&P 500 this monthBrokerage firms
Brokerage firms
Brokerage firmson Charles Schwab's website
on E*TRADE's website
on Vanguard's website
on Fidelity's website
Advantages of investing in the S&P 500
Advantages of investing in the S&P 500Larger companies are generally more stable investments since they're well-established and widely followed. These stocks usually have less risk and lower volatility.
Larger companies are generally more stable investments since they're well-established and widely followed. These stocks usually have less risk and lower volatility.The S&P 500 comprises large companies across various industries, giving investors access to a broad, diversified mix. An index fund or ETF can also help investors avoid the research and stock picking required for individual stocks.
The S&P 500 comprises large companies across various industries, giving investors access to a broad, diversified mix. An index fund or ETF can also help investors avoid the research and stock picking required for individual stocks. What experts are saying What experts are sayingFeatured voice → Dejan Ilijevski, a financial advisor based in Munster, Indiana.
Featured voice → Dejan Ilijevski, a financial advisor based in Munster, Indiana. Featured voice → Dejan Ilijevski, a financial advisor based in Munster, Indiana.An index fund or ETF can help investors avoid the behavioral pitfalls of stock-picking, which is a losing strategy, says Ilijevski.
An index fund or ETF can help investors avoid the behavioral pitfalls of stock-picking, which is a losing strategy, says Ilijevski.“Picking those few individual winners is impossible,” Ilijevski says. "Your best bet is to own as much of the market with a fund that tracks the index.”
“Picking those few individual winners is impossible,” Ilijevski says. "Your best bet is to own as much of the market with a fund that tracks the index.”Disadvantages of investing in the S&P 500
Disadvantages of investing in the S&P 500While an S&P 500 ETF or index fund may be a worthwhile investment, there are caveats to consider.
While an S&P 500 ETF or index fund may be a worthwhile investment, there are caveats to consider.The S&P 500 consists of only large-cap U.S. stocks (i.e., stocks with a market capitalization of $10 billion or more). Portfolio diversification encompasses:
The S&P 500 consists of only large-cap U.S. stocks (i.e., stocks with a market capitalization of $10 billion or more). Portfolio diversification encompasses:Buying mid- and small-cap companies along with large caps.
Buying mid- and small-cap companies along with large caps.Allocating funds to international companies along with domestic ones.
Allocating funds to international companies along with domestic ones.Including bonds, cash and potentially other asset classes with stocks.
Including bonds, cash and potentially other asset classes with stocks.But relative to the downsides of many investment types, the flaws of S&P 500 funds seem relatively minor. This is especially true if you use the S&P 500 as part of your overall portfolio and hold for the long term.
But relative to the downsides of many investment types, the flaws of S&P 500 funds seem relatively minor. This is especially true if you use the S&P 500 as part of your overall portfolio and hold for the long term. What experts are saying What experts are sayingFeatured voice → Kevin Koehler, a chartered financial analyst based in Chicago.
Featured voice → Kevin Koehler, a chartered financial analyst based in Chicago. Featured voice → Kevin Koehler, a chartered financial analyst based in Chicago."As passive investing increases, investors are continually investing in S&P 500 funds, which has contributed to a ‘rich get richer’ problem, where the largest stocks are getting larger due to S&P 500 investing, rather than individual stock investing.
"As passive investing increases, investors are continually investing in S&P 500 funds, which has contributed to a ‘rich get richer’ problem, where the largest stocks are getting larger due to S&P 500 investing, rather than individual stock investing."This can lead to higher volatility, as active managers sell an individual stock on top of index funds selling a portion. The market could continuously be overvalued compared to its underlying value."
"This can lead to higher volatility, as active managers sell an individual stock on top of index funds selling a portion. The market could continuously be overvalued compared to its underlying value."Should you invest in an S&P 500 index fund or ETF?
Should you invest in an S&P 500 index fund or ETF?While all S&P 500 index funds track the index's holdings, there are several differences to consider. For example, ETFs can be bought and sold whenever the stock market is open. Index funds, on the other hand, can only be bought and sold at a set price point at the end of each trading day.
While all S&P 500 index funds track the index's holdings, there are several differences to consider. For example, ETFs can be bought and sold whenever the stock market is open. Index funds, on the other hand, can only be bought and sold at a set price point at the end of each trading day.The good news is that there are solid S&P 500 options in each category, and all of these products leverage the index's diversity. Compare index funds and ETFs to decide which one is right for you.
The good news is that there are solid S&P 500 options in each category, and all of these products leverage the index's diversity. Compare index funds and ETFs to decide which one is right for you.Is now a good time to invest in the S&P 500?
Is now a good time to invest in the S&P 500?Tracey Dean, a certified financial planner in Salt Lake City, Utah, says not to worry about whether the market is at a high or a low, since you'll likely see both if you're invested in the market over many years.
Tracey Dean, a certified financial planner in Salt Lake City, Utah, says not to worry about whether the market is at a high or a low, since you'll likely see both if you're invested in the market over many years.“They'll be another top or there'll be a bottom. That's the ebb and flow of and volatility of the markets," she says. So, no matter what’s happening in the market, now is a good time to invest if you’re investing for the long term.
“They'll be another top or there'll be a bottom. That's the ebb and flow of and volatility of the markets," she says. So, no matter what’s happening in the market, now is a good time to invest if you’re investing for the long term. Neither the author nor editor held positions in the aforementioned investments at the time of publication. Neither the author nor editor held positions in the aforementioned investments at the time of publication. Neither the author nor editor held positions in the aforementioned investments at the time of publication. About the author Tiffany Lam-Balfour Tiffany Lam-Balfour Tiffany Lam-Balfour is a former investing writer and spokesperson at NerdWallet. Previously, she was a senior financial advisor and sales manager at Merrill Lynch. Her work has been featured in MSN, MarketWatch, Entrepreneur, Nasdaq and Yahoo Finance. Tiffany earned a finance and management degree from The Wharton School of the University of Pennsylvania. See full bio.ON THIS PAGE
What does it mean to invest in the S&P 500? What does it mean to invest in the S&P 500? The easiest way to invest in the S&P 500 The easiest way to invest in the S&P 500 How much does it cost to invest in the S&P 500? How much does it cost to invest in the S&P 500? Advantages of investing in the S&P 500 Advantages of investing in the S&P 500 Disadvantages of investing in the S&P 500 Disadvantages of investing in the S&P 500 Should you invest in an S&P 500 index fund or ETF? Should you invest in an S&P 500 index fund or ETF? Is now a good time to invest in the S&P 500? Is now a good time to invest in the S&P 500?ON THIS PAGE
What does it mean to invest in the S&P 500? What does it mean to invest in the S&P 500? The easiest way to invest in the S&P 500 The easiest way to invest in the S&P 500 How much does it cost to invest in the S&P 500? How much does it cost to invest in the S&P 500? Advantages of investing in the S&P 500 Advantages of investing in the S&P 500 Disadvantages of investing in the S&P 500 Disadvantages of investing in the S&P 500 Should you invest in an S&P 500 index fund or ETF? Should you invest in an S&P 500 index fund or ETF? Is now a good time to invest in the S&P 500? Is now a good time to invest in the S&P 500? More like this Investment Basics Investing Best Robo-Advisors: Top Picks for March 2026 We spent hours testing robo-advisors to find ones that charge low fees but still offer high-quality features, including automated portfolio rebalancing, exposure to a range of asset classes and financial planning tools. Alana Benson 7 High-Dividend Stocks With Yields Over 6% (March 2026) Dividend stocks can be a great choice for investors looking for passive income and portfolio stability. Here's what to look for when evaluating dividend stocks and how to invest in them. 2 By Chris Davis, Sam Taube Best Brokers for Beginner Investors: Top Picks for 2026 We spent hours analyzing the best brokers for beginners to find ones that offer low costs, helpful educational content and a broad investment selection. Our testers also looked for trading platforms that are easy to navigate. Alana Benson Best Investments: Where to Invest in 2026 Wondering where to invest your money this year? High-yield savings accounts, CDs, bonds, funds and stocks are all considered among the best investments available. Learn more about the risks, potential returns and how to get started. 2 By Chris Davis, Alieza Durana Best Brokerage Accounts for Online Investing and Stock Trading in 2026 Based on hours of analysis and hands-on testing, here are our picks for the best brokerage accounts based on their low fees, strong platforms, quality customer support and other factors. Chris Davis Best Robo-Advisors: Top Picks for March 2026 We spent hours testing robo-advisors to find ones that charge low fees but still offer high-quality features, including automated portfolio rebalancing, exposure to a range of asset classes and financial planning tools. Alana Benson 7 High-Dividend Stocks With Yields Over 6% (March 2026) Dividend stocks can be a great choice for investors looking for passive income and portfolio stability. Here's what to look for when evaluating dividend stocks and how to invest in them. 2 By Chris Davis, Sam Taube Best Brokers for Beginner Investors: Top Picks for 2026 We spent hours analyzing the best brokers for beginners to find ones that offer low costs, helpful educational content and a broad investment selection. Our testers also looked for trading platforms that are easy to navigate. Alana Benson Best Investments: Where to Invest in 2026 Wondering where to invest your money this year? High-yield savings accounts, CDs, bonds, funds and stocks are all considered among the best investments available. Learn more about the risks, potential returns and how to get started. 2 By Chris Davis, Alieza Durana Best Brokerage Accounts for Online Investing and Stock Trading in 2026 Based on hours of analysis and hands-on testing, here are our picks for the best brokerage accounts based on their low fees, strong platforms, quality customer support and other factors. Chris Davis Best Robo-Advisors: Top Picks for March 2026 We spent hours testing robo-advisors to find ones that charge low fees but still offer high-quality features, including automated portfolio rebalancing, exposure to a range of asset classes and financial planning tools. Alana Benson 7 High-Dividend Stocks With Yields Over 6% (March 2026) Dividend stocks can be a great choice for investors looking for passive income and portfolio stability. Here's what to look for when evaluating dividend stocks and how to invest in them. 2 By Chris Davis, Sam Taube Best Brokers for Beginner Investors: Top Picks for 2026 We spent hours analyzing the best brokers for beginners to find ones that offer low costs, helpful educational content and a broad investment selection. Our testers also looked for trading platforms that are easy to navigate. Alana Benson Best Investments: Where to Invest in 2026 Wondering where to invest your money this year? High-yield savings accounts, CDs, bonds, funds and stocks are all considered among the best investments available. Learn more about the risks, potential returns and how to get started. 2 By Chris Davis, Alieza Durana