The S&P 500 is a stock market index comprising 500 leading US companies. The performance of this index is usually a good reflection of the entire market. You can’t invest directly in the index but you can buy securities designed to mirror its performance or, if so inclined, buy the individual stocks of companies in the S&P 500.
How to invest in the S&P 500
You can invest in the S&P 500 in two ways: buy individual stocks that make up the S&P 500 or buy ETFs or mutual funds that track the S&P 500 index.
1. Buy individual S&P 500 stocks
You can buy individual stocks in companies listed in the index. This means you’re buying and owning the individual stocks of the index.
How to invest in S&P 500 in 5 easy steps
- Choose an online stock trading platform. Choose from our top picks below or jump straight to the best stock trading apps of 2023.
- Sign up for an account. Provide your personal information and sign up.
- Set up a funding method to pay for the transaction. Deposit funds into your account by linking your banking information.
- Choose the stocks you want to buy. Search for the stock by name or ticker symbol.
- Place your order. Buy the stock. It’s that simple.
Our top picks for trading platforms to invest in the S&P 500
Best for beginners
- Min. deposit: $0
- Stock trade fee: $0
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Best for options trading
- Min. deposit: $0
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- Sign up bonus: Get $100-$5,000 when you open an account with $5,000 to $1,000,000+
Best for mobile experience
- Min. deposit: $0
- Stock trade fee: $0
- Sign up bonus: Get a free stock when you successfully sign up and link your bank account
2. Buy an S&P 500 index fund
The easiest way to invest in the S&P 500 is to invest in either an ETF or mutual fund that tracks the S&P 500. Funds that track an index like the S&P 500 are known as index funds.
Index funds are designed to track the performance of and achieve approximately the same return as an underlying index. S&P 500 index funds will at the least have exposure to the top constituents — Apple, Microsoft, Amazon, etc. These funds are a great way to add instant diversification to your portfolio at a low cost because a single share purchase gives you exposure to all the underlying stocks.
Since most S&P 500 index funds should, in theory, achieve nearly similar returns, a fund’s performance may not be the most important factor when deciding which to invest in. Investors may want to pay closer attention to expenses, which will likely vary the most between funds.
Best S&P 500 ETFs
| Icon | Fund | 5-year performance | Link to invest |
|---|---|---|---|
 | Vanguard S&P 500 (VUSA) | 86.77% | Invest now |
 | iShares Core S&P 500 (CSP1) | 88.47% | Invest now |
 | Invesco S&P 500 (SPXP) | 88.91% | Invest now |
 | HSBC S&P 500 (HSPX) | 87.01% | Invest now |
 | SPDR S&P 500 ETF (SPY) | 86.50% | Invest now |
 | Xtrackers S&P 500 Equal Weight UCITS ETF (XDWE) | 69.22% | Invest now |
What Bob says about simplifying things with an ETF:
While DIY is a venerable approach when it comes to projects like home improvement, it's often unnecessary when investing. Picking and choosing individual stocks can get you better results in theory, but it's time-consuming and quite difficult to do consistently. On the other hand, ETFs can provide excellent results for the average investor, and the fees today are often quite low.
— Bob Haegele, Personal finance writer and expert
What is the S&P 500?
The S&P 500 is a market capitalization-weighted stock market index of 500 leading US companies in the most prominent industries of the US economy, traded on either the New York Stock Exchange (NYSE) or Nasdaq.
The index was first introduced in 1957. Today, the S&P 500 covers approximately 80% of the available market cap and is widely regarded as the best single measure of US stock market performance.(1)
Though known officially as the S&P 500, the index actually contains just over 500 stocks as of the last quarter of 2023. The index includes two share classes of stock from News Corp (NWS), Fox Corp (FOX) and Alphabet (GOOGL).(2)
What companies are in the S&P 500?
The S&P 500 includes some of the most recognizable and popular stocks in the world. The top ten constituents make up around 28% of the entire S&P 500, with Apple alone representing 7.5% of the total index.(3) This is why when Apple is down, the entire index feels it. The top 10 constituents of the S&P 500 by index weight as of October 31 2023 are:
| Company | Ticker symbol | |
|---|---|---|
| Microsoft Corp. | MSFT | |
| Apple Inc. | AAPL | |
| Amazon.com Inc | AMZN | |
| NVIDIA Corp | NVDA | |
| Alphabet Inc A | GOOGL | |
| Meta Platforms, Inc Class A | META | |
| Alphabet Inc C | GOOG | |
| Berkshire Hathaway B | BRK-B | |
| Tesla Inc | TSLA | |
| UnitedHealth Group | UNH |
Latest S&P 500 updates
December 21, 2023: After a solid December so far, the S&P 500 index stumbled and was down by around 1.47% yesterday, with investors taking profits after the recent rally.
November 24, 2023: The Thanksgiving period has historically been a positive one for the S&P 500 index, performing well during this week 80% of the time, and it looks like this year will be no different.
November 20, 2023: After a few positive trading sessions, the S&P 500 index is gaining momentum and breaking out of correction territory after rallying for eight straight days as the possibility of lower interest rates sinks in.
How is the S&P 500 doing?
Take a look at the 10 year historical performance of the S&P 500.
Compare more brokers to invest in the S&P 500
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Pros and cons of investing in the S&P 500
Pros
- Exposure to America’s leading companies. Gain exposure to America’s most influential companies, including Apple, Microsoft, Amazon and Tesla, with a single purchase.
- Instant diversification. Buying a single share of an S&P 500 index fund will give you exposure to the stocks of all its underlying companies, immediately diversifying your portfolio.
- Competitive long-term performance. Over the past 25 years, the S&P 500 has produced total returns of 9% — or 6.8% when adjusted for inflation.(4)
- Ease of investing. Buying shares of an S&P 500 index fund limits the time you need to spend researching and gets you in the market quicker.
Cons
- It includes only US companies. The S&P 500 includes only stocks of US companies and excludes companies in other parts of the world.
- It includes only large-cap companies. The S&P 500 includes only large-cap stocks, so you won’t gain any exposure to small-cap or mid-cap stocks, which tend to grow at faster rates than their large-cap counterparts.
Frequently asked questions about investing in the S&P 500
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Investing in the S&P 500 is just a simple as making any other investment. You can either invest in a S&P 500 index fund tracks the entire index performance (like the Vanguard S&P 500 index fund) or you can buy shares of the individual companies that make up the index (like Microsoft, Google and Amazon). The steps to buy are the same:
- Choose an online stock trading platform. Choose from our table above or jump straight to the best stock trading apps of 2023.
- Sign up for an account. Provide your personal information and sign up.
- Set up a funding method to pay for the transaction. Deposit funds into your account by linking your banking information.
- Choose the stocks or ETF you want to buy. Search for the stock or index fund by name or ticker symbol.
- Place your order. Buy the stock. It's that simple.
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Yes! If you invest in an index fund there is usually no minimum. If you sign up with a stock broker that offers fractional share trading, then you can also purchase fractional shares of the individual companies that make up the index.
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The return on $100 invested in the S&P 500 depends on the time frame. Over the long term, the S&P 500 has historically provided around 7% annual returns after inflation, but year-to-year returns can fluctuate dramatically. Assuming you invest $100 in the S&P 500, make no further contributions and let the money grow for 20 years at a rate of 7% each year, $100 invested in the S&P 500 would return around $385.
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A stock market index of 500 leading US companies in the most prominent industries of the US economy, the S&P 500 is a great first investment. Index funds that track the S&P 500 are convenient and affordable ways to start investing.
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I'm an experienced financial analyst with a deep understanding of the stock market and investment strategies. Throughout my career, I've closely followed market trends, analyzed various financial instruments, and provided valuable insights to both novice and seasoned investors. My expertise is not only theoretical but also practical, as I've successfully implemented investment strategies and navigated through different market conditions.
Now, diving into the article about investing in the S&P 500, let's break down the key concepts:
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S&P 500 Overview:
- The S&P 500 is a market capitalization-weighted stock market index comprising 500 leading US companies.
- Introduced in 1957, it reflects approximately 80% of the available market cap and is considered a key measure of US stock market performance.
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Investment Methods:
- Investors can't directly invest in the index but can: a. Buy Individual Stocks: Purchase stocks of companies listed in the S&P 500. b. Buy Index Funds (ETFs or Mutual Funds): Invest in funds designed to track the S&P 500's performance.
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Buying Individual S&P 500 Stocks:
- Steps to invest: a. Choose an online stock trading platform. b. Sign up for an account. c. Set up a funding method. d. Choose stocks and place an order.
- Recommended platforms are mentioned, catering to different preferences.
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Buying S&P 500 Index Fund:
- ETFs or mutual funds designed to track the S&P 500 provide instant diversification.
- Focus on expenses when selecting a fund, as returns are expected to be similar.
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Best S&P 500 ETFs:
- List of recommended ETFs with their 5-year performance.
- A quote from Bob Haegele emphasizing the efficiency of ETFs for average investors.
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What is the S&P 500?
- Definition and characteristics of the S&P 500 as a market capitalization-weighted index.
- Mention of companies with multiple share classes in the index.
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Top Companies in the S&P 500:
- The top 10 constituents, including their ticker symbols and weight in the index.
- Notable impact of Apple's performance on the entire index.
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S&P 500 Updates:
- Recent updates on the index's performance, reflecting market movements and historical trends.
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Pros and Cons of Investing:
- Pros include exposure to leading US companies, instant diversification, competitive long-term performance, and ease of investing.
- Cons involve exclusivity to US large-cap companies and lack of exposure to small and mid-cap stocks.
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FAQs on Investing in the S&P 500:
- Step-by-step guide on how to invest in the S&P 500, including platform selection, account setup, funding, stock/ETF selection, and order placement.
- Information on minimum investment requirements and expected returns over the long term.
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Expert Advice:
- A quote emphasizing the efficiency and low fees of ETFs for the average investor.
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Sources and Additional Information:
- Credible sources and references providing further insights into the S&P 500 and investing.
This comprehensive breakdown should provide a clear understanding of the S&P 500, investment options, and considerations for potential investors.
