The S&P 500 is the most watched stock market benchmark in the world. For most retail investors, buying a low-cost S&P 500 index fund is the single best investment decision they can make. In this guide, we cover the best S&P 500 index funds available in 2026, how they differ, and exactly how to buy one.
What Is the S&P 500?
The S&P 500 is a market-capitalization-weighted index of 500 of the largest publicly traded companies in the United States. It is maintained by S&P Dow Jones Indices and is widely considered the best single gauge of the large-cap U.S. equity market.
Companies are selected for inclusion based on market cap (currently above $18 billion), liquidity, profitability, and public float. The index is rebalanced quarterly. As of 2026, the top holdings include Apple, Microsoft, Nvidia, Amazon, and Alphabet, which together represent more than 20 percent of the index.
Why the S&P 500 Matters to Investors
The S&P 500 has returned an average of approximately 10.5 percent annually since its inception in 1957, including dividends. This long-term track record has made it the default benchmark against which all other investment strategies are measured.
When someone says “the market is up 2 percent today,” they almost always mean the S&P 500 is up 2 percent.
S&P 500 Index Fund vs S&P 500 ETF
Both S&P 500 index funds (mutual funds) and S&P 500 ETFs track the same index. The main differences are in how you buy them and their trading mechanics.
Mutual fund index funds (like Vanguard’s VFIAX) are priced once per day at market close. You buy or sell at the end-of-day net asset value. They often require a minimum investment, though many have lowered or eliminated minimums.
ETFs (like SPY, VOO, or IVV) trade throughout the day on stock exchanges like a regular stock. You can buy fractional shares at most major brokerages. They tend to have slightly lower expense ratios in some cases and offer more flexibility for tax-loss harvesting.
For long-term buy-and-hold investors, the difference is minor. Either works.
Best S&P 500 Index Funds in 2026
Vanguard 500 Index Fund Admiral Shares (VFIAX)
Vanguard is the pioneer of index investing, and VFIAX remains one of the gold standards. Expense ratio: 0.04 percent. Minimum investment: $3,000. The ETF equivalent is VOO, which has no minimum and the same 0.03 percent expense ratio.
Vanguard’s unique ownership structure (owned by its funds, which are owned by investors) creates an inherent incentive to keep costs low. It has delivered consistent performance closely tracking the S&P 500 for decades.
Fidelity 500 Index Fund (FXAIX)
FXAIX has an expense ratio of 0.015 percent, one of the lowest in the industry. No minimum investment. It is available only to Fidelity account holders but is an excellent choice for investors using that platform.
Fidelity’s funds are known for tight tracking error and excellent execution. FXAIX has outperformed VFIAX slightly over some periods purely due to the fee difference.
Schwab S&P 500 Index Fund (SWPPX)
Charles Schwab’s offering has a 0.02 percent expense ratio and no investment minimum. It is an excellent option for Schwab customers and has a long track record of closely matching index performance.
iShares Core S&P 500 ETF (IVV)
Managed by BlackRock, IVV is the second-largest ETF in the world by assets under management. Its expense ratio is 0.03 percent. It trades on exchanges throughout the day and is available at all major brokerages. It is a strong alternative to VOO for investors not at Vanguard.
SPDR S&P 500 ETF Trust (SPY)
SPY was the first U.S. ETF, launched in 1993. It remains the most traded ETF in the world by volume. Its expense ratio is 0.0945 percent, slightly higher than its competitors. For long-term investors, VOO or IVV are better choices, but SPY’s liquidity makes it the preferred vehicle for institutional traders and short-term strategies.
How to Buy an S&P 500 Index Fund
Step 1: Open a Brokerage or Retirement Account
You need an account before you can buy anything. For most people, starting with a tax-advantaged account (Roth IRA or 401k) makes the most sense. You can open a Roth IRA at Fidelity, Vanguard, or Schwab in about 15 minutes online.
If you already max out tax-advantaged accounts or want additional flexibility, a standard taxable brokerage account works well too.
Step 2: Fund Your Account
Link your bank account and transfer funds. Most brokerages settle the transfer in 1 to 3 business days. Some offer instant purchase power before the transfer settles.
Step 3: Search for the Fund
In your brokerage platform, search for the ticker symbol of your chosen fund: FXAIX, VFIAX, VOO, IVV, or SWPPX. Each platform has a search bar where you can enter the ticker to pull up the fund page.
Step 4: Place Your Order
For ETFs, click “Buy” and enter either the dollar amount (if fractional shares are available) or the number of shares. Select “market order” for immediate execution at the current price, or “limit order” if you want to specify a price.
For mutual fund index funds like FXAIX or VFIAX, you typically buy by dollar amount. Enter the amount you want to invest and confirm. The order executes at end of day.
Step 5: Set Up Automatic Investments
The most important step after your initial purchase is setting up automatic monthly investments. This ensures you invest consistently without needing to remember or make active decisions each month.
How Much of Your Portfolio Should Be in the S&P 500?
For a U.S.-focused investor, a 100 percent S&P 500 allocation is common, especially for younger investors with long time horizons. However, the S&P 500 only covers U.S. large-cap stocks. A more diversified portfolio might include:
- 60-70 percent S&P 500 or Total U.S. Market
- 20-30 percent international stocks
- 0-20 percent bonds (increasing with age)
Whether you hold 60 percent or 100 percent of your equity in S&P 500 funds depends on your personal preference for simplicity versus diversification.
S&P 500 Historical Performance
Understanding historical returns helps set realistic expectations. Here is how the S&P 500 has performed over major time periods (total return, including dividends):
- 1-year (2025): approximately 14 percent
- 5-year annualized (2020-2025): approximately 15 percent
- 10-year annualized (2015-2025): approximately 13 percent
- 30-year annualized (1995-2025): approximately 10.7 percent
These returns include years with significant losses: -38 percent in 2008, -19 percent in 2022. Long-term investing requires the ability to hold through those down years without selling.
Dividend Reinvestment
S&P 500 companies collectively pay dividends. The current dividend yield on the S&P 500 is roughly 1.3 to 1.5 percent annually. When you own an index fund, those dividends are distributed to you and can be automatically reinvested to buy more shares.
Enabling DRIP (Dividend Reinvestment Plan) in your brokerage account is simple and significantly boosts long-term returns through compounding.
Tax Considerations
In a Roth IRA or 401(k), gains and dividends grow tax-free or tax-deferred. In a taxable brokerage account, you will owe taxes on dividends received each year and on capital gains when you sell.
S&P 500 index funds are generally tax-efficient because they have low turnover. They rarely sell holdings, which means minimal capital gain distributions compared to active funds.
Common Questions About S&P 500 Funds
Is Now a Good Time to Buy?
The research consistently shows that lump sum investing outperforms waiting for a dip about two-thirds of the time. If you have money to invest and a long time horizon, invest it now and continue investing monthly. Timing the market reliably is not possible.
What Happens If the S&P 500 Crashes?
Every significant crash in S&P 500 history has been followed by recovery to new all-time highs. The 2008 crash saw a 50 percent loss followed by a 400 percent gain over the following decade. The 2020 pandemic crash recovered in just five months. Staying invested through downturns is essential.
Can I Lose All My Money in an S&P 500 Fund?
The only scenario where an S&P 500 fund goes to zero is if all 500 of the largest U.S. companies simultaneously go bankrupt, which would imply a complete collapse of the U.S. economy. While the index can fall significantly in downturns, total loss is not a realistic concern for a diversified index fund over long periods.
The Bottom Line
Buying a low-cost S&P 500 index fund is one of the most proven wealth-building strategies available to retail investors. Choose a fund with the lowest expense ratio at the brokerage you already use or plan to open, automate monthly contributions, and stay invested for the long term.
FXAIX at Fidelity, VOO at any brokerage, and SWPPX at Schwab are all excellent choices. The differences between them are minor. The most important step is simply to start.