The 5 Best S&P 500 Index Funds for March 2024 - NerdWallet (2024)

S&P 500 index funds can help you immediately diversify your portfolio by providing exposure to some of the largest companies in the United States.

Index funds are generally quite inexpensive compared to other types of mutual funds, making them an attractive option for most investors.

What is the best S&P 500 index fund?

Which S&P 500 index fund is best for you depends on the minimum investment, the costs and the extent to which it matches the S&P 500 market index.

Current market data closes March 1, 2024. For information purposes only.

What is an S&P 500 Index Fund?

An S&P 500 index fund is a fund that tracks- Amarket indexthat measures the performance of approximately 500 U.S. companies.

By definition, index funds aim to reflect a particular market index, whether it is the Dow Jones Industrial Average, the Nasdaq Composite Index or the S&P 500. Because they contain largely the same investments, an index fund will likely perform similarly to general index funds. market index itself.

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 invest in 500 of the largest companies in the US, covering many types of industries and sectors.

How Many S&P 500 Index Funds Do I Need?

S&P 500 index funds will be virtually identical to each other in terms of their performance and their holdings, or the specific stocks held in 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. Make sure you look at a fund's investments to know exactly how closely your fund tracks its benchmark index.

If you have one index fund and want to diversify further, consider exploring index funds that cover other market indexes, such as the Dow Jones or Nasdaq.

How to Choose an S&P 500 Index Fund

While most S&P index funds will have similar holdings, they may differ in their fees, such as expense ratios.cost ratioare annual fees you pay to help cover the costs of a fund. If you invest in a fund with a 0.25% expense ratio, you will pay $2.50 annually for every $1,000 invested. That may not sound like much, but as your account balance grows, so does your fee.

Consider looking for S&P 500 index funds with low expense ratios, multiple years of operation, and a healthy amount of assets under management (AUM). The longer a fund has been in existence, the more information you have about its performance history. If a fund is only a few years old, it is difficult to know how it would perform in a different type of market (although past performance is not indicative of future performance).

A fund's assets under management can give you an idea of ​​the size of a fund. If a fund has relatively high assets under management, this may indicate that the fund may be more stable in volatile markets.

How to invest in the S&P 500

You cannot invest in the S&P 500 itself. S&P 500 index funds are one way to invest in the S&P 500. You can also invest in the individual stocks represented in the S&P 500, but that would be a lot more work because you have to track the performance of each individual stock.

If you're ready to start investing in S&P 500 index funds or individual company stocks, do this firstopen a securities account.

What is the difference between S&P 500 index funds and S&P 500 ETFs?

The biggest difference betweenand the S&P 500 index fund isexchange traded funds(ETFs), like stocks, can be traded all day long, while index funds can only be bought and sold at the price determined at the end of the trading day. S&P 500 funds, whether index funds or ETFs, both track the S&P 500.

If you invest for the long term, meaning you buy and hold the money for five years or more, this difference doesn't matter much. But ETFs are generally more tax efficient than index funds.