Jeff Reeves writes about investments, the stock market, exchange-traded funds and retirement topics. A veteran journalist with extensive capital markets experience, Jeff has covered Wall Street and investing since 2008. Beyond Forbes Advisor, his work has appeared in numerous respected finance outlets including CNBC, Fox Business, The Wall Street Journal digital network, Kiplinger, USA Today and CNN Money.
Jeff Reeves writes about investments, the stock market, exchange-traded funds and retirement topics. A veteran journalist with extensive capital markets experience, Jeff has covered Wall Street and investing since 2008. Beyond Forbes Advisor, his work has appeared in numerous respected finance outlets including CNBC, Fox Business, The Wall Street Journal digital network, Kiplinger, USA Today and CNN Money.
Investing Expert
Michael Adams is lead editor, investing at Forbes Advisor. He’s researched, written about and practiced investing for nearly two decades. As a writer, Michael has covered everything from stocks to cryptocurrency and ETFs for many of the world’s major financial publications, including Kiplinger, U.S. News and World Report, The Motley Fool and more. Michael holds a master’s degree in philosophy from The New School for Social Research and an additional master’s degree in Asian classics from St. John’s College.
Michael Adams is lead editor, investing at Forbes Advisor. He’s researched, written about and practiced investing for nearly two decades. As a writer, Michael has covered everything from stocks to cryptocurrency and ETFs for many of the world’s major financial publications, including Kiplinger, U.S. News and World Report, The Motley Fool and more. Michael holds a master’s degree in philosophy from The New School for Social Research and an additional master’s degree in Asian classics from St. John’s College.
Updated: May 2, 2024, 8:28pm
Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors’ opinions or evaluations.
Exchange-traded funds that track the S&P 500 are the cornerstone of countless investment portfolios. Over the long term, it’s close to impossible to build an investment portfolio that outperforms the S&P 500, which is why it’s used as a basic investing benchmark.
Trillions of dollars are invested in funds that track the performance of the S&P 500. To help you choose which one is right for you, we have rounded up eight of the best S&P 500 ETFs to consider right now.
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8 Best S&P 500 ETFs of June 2024
SPDR S&P 500 ETF Trust (SPY)
Editor’s Take
Launched back in 1993, the iconic SPDR S&P 500 ETF Trust is the largest exchange-traded fund by net assets in the U.S. It’s also the original ETF. Thanks to its size and tenure, SPY offers traders dependability and outstanding liquidity, with an average daily trading volume of around 81 million shares over the last three months.
With a net expense ratio of 0.0945%—holders pay an annual management fee of $9.45 on every $10,000 invested—SPY is not the cheapest fund option on our list. However, it is the most well established and the most liquid fund in the entire stock market, giving active traders a huge advantage in their ability to rapidly buy and sell positions.
iShares Core S&P 500 ETF (IVV)
Editor’s Take
The iShares Core S&P 500 ETF is the second-largest exchange-traded fund in the U.S. in terms of net assets after SPY. And while IVV and SPY own practically identical portfolios, there are important differences between these two funds.
For buy-and-hold investors, the most important difference is cost. IVV charges an annual expense ratio of only 0.03%. That means you pay $3.00 on every $10,000 invested, roughly one-third the annual cost of SPY. But for active traders, IVV is at a disadvantage: With an average daily trading volume of about 4.4 million shares over the last three months, IVV offers a fraction of the liquidity of SPY.
Vanguard 500 Index Fund (VOO)
Editor’s Take
As the third largest exchange-traded fund by net assets in the U.S., the Vanguard 500 Index Fund is in the same league as SPY and IVV. The fund owns a substantially identical portfolio of the 500 largest U.S. public companies, with performance that’s practically the same as its larger siblings.
VOO charges exactly the same expense ratio as IVV, making it an identical choice from a cost perspective. So, what’s the difference? Their total returns are similar. Is either fund’s dividend yield higher at the moment? It mostly boils down to taste, as some brokerage platforms offer incentives to own one fund as opposed to the other. Who would you prefer to manage your money? Vanguard or BlackRock’s iShares?
SPDR Portfolio S&P 500 ETF (SPLG)
Editor’s Take
The SPDR Portfolio S&P 500 ETF offers the same portfolio and performance as the three funds listed above. Why would SPDR bother offering a second S&P 500 ETF when it has SPY? To compete on cost. SPLG is a shade cheaper than IVV and VOO, and much cheaper than SPY. One big difference between SPLG and the three other funds above is size, as it has a much smaller pool of net assets.
Invesco S&P 500 Equal Weight ETF (RSP)
Editor’s Take
The S&P 500 Index may be a customary stand-in for the entire U.S. stock market, but it’s not without its flaws. Chief among them is that the index’s 500 component companies are market-cap weighted. This means two tech giants—Apple (AAPL) and Microsoft (MSFT)—account for about 15% of the entire index at the moment. Some investors view that as a risky level of concentration.
Most investors don’t mind this bias toward mega-cap companies. But if you’re looking for even greater diversification, the Invesco S&P 500 Equal Weight ETF offers an alternative. As its name suggests, RSP is an equal-weight fund. The fund aims to sustain a 0.2% weighting for each of the 500 components in the index via regular rebalancing. That’s a more hefty management task than simply tracking the benchmark, which accounts for RSP’s much higher annual expense ratio.
SPDR Portfolio S&P 500 Growth ETF (SPYG)
Editor’s Take
The SPDR Portfolio S&P 500 Growth ETF offers a more tactical approach to the S&P 500 by focusing solely on the growth stocks in the index. This means it applies a screening methodology that cuts out roughly half of the 500 component companies, and only holds stocks with the strongest growth metrics—like sales growth and share price momentum.
There are other growth-oriented index funds out there, but with an expense ratio of only 0.04%—that’s just a $4.00 fee on every $10,000 invested—SPYG is nearly as affordable as some of the low-cost core S&P ETFs we profile above.
Vanguard S&P 500 Value Index Fund ETF (VOOV)
Editor’s Take
In stock market terms, value is the opposite of growth. Value investing involves buying stocks that have been potentially mispriced by markets yet still offer proven stability and solid balance sheets.
The Vanguard S&P 500 Value Index Fund ETF uses this kind of value investing approach, which includes examining fundamental metrics like book value and earnings potential to screen out approximately 20% of the benchmark index’s components. This results in a fund portfolio of around 400 stocks with the best value potential in the index.
VOOV is a little more expensive than the other options on this list, but with a net expense ratio of 0.10%—which means you pay $1.00 on every $10,000 invested—many investors should still consider it quite affordable.
ProShares Short S&P 500 ETF (SH)
Editor’s Take
The ProShares Short S&P 500 is an inverse ETF that aims to deliver the opposite performance of the S&P 500 each day. Over the long run, it’s crazy to bet against the index, but over short-term periods the S&P 500 can see very steep losses. And it’s on big down days that this ETF shines.
Please note that inverse ETFs should never be held for longer than a single session or several sessions at the very most. Day traders and investing professionals use inverse ETFs like SH to hedge their portfolios and make tactical plays on short-term market movements. They are not for the faint of heart, and only experienced investors should dabble with these complex instruments.
Instead of owning stocks, SH holds derivative contracts such as swaps and futures to generate returns. All in all, the complicated management tasks of this ETF demand a significantly higher expense ratio of 0.89%, but absolutely no one should hold the fund for as long as one year.
* All data sourced from Morningstar Direct, current as of June 5, 2024.
Methodology
Our list of the best S&P 500 exchange-traded funds is divided into two groups: core ETFs and tactical ETFs. The core funds can serve as the cornerstone of a diversified, long-term investing portfolio, while the tactical funds are best for medium- and short-term investment goals.
The core S&P 500 ETFs listed above—SPY, IVV, VOO and SPLG—represent the four largest funds in the category as measured by net assets and daily trading volume. We also focused on funds that were affordable, with expense ratios of less than 0.10%.
The tactical S&P 500 ETFs on our list—RSP, SPYG, VOOV and SH—come from separate categories, like value, growth and inverse. We selected well-established funds with more than $1 billion in net assets that also charge the lowest fees among their peers.
What Are S&P 500 ETFs?
An S&P 500 ETF is an exchange-traded fund that aims to duplicate the performance of the S&P 500 Index, or some other dimension of this key stock market benchmark.
Exchange-traded funds are a relatively new phenomenon, which started in 1993 with the launch of the SPDR S&P 500 ETF Trust. Today, SPY remains the biggest, most popular ETF in terms of both net assets and daily trading volume.
Most exchange-traded funds are index funds that aim to duplicate the performance of a market index. Fund managers purchase a basket of securities that duplicates the makeup of a benchmark index. Investors buy and sell the fund’s shares on the open market throughout the trading day, like stocks.
The S&P 500 is a market-capitalization weighted index, which means that the proportion of each company’s representation in the index is based on the total market value of its outstanding shares. Many of the best S&P 500 ETFs follow this market-cap approach, although RSP opts for an equal-weight strategy.
Core vs. Tactical S&P 500 ETFs
The most popular S&P 500 ETFs are straightforward plays on this popular stock market index. These are the core S&P 500 ETFs. They are designed to track this benchmark index almost exactly, save for minor tracking errors. Core S&P 500 ETFs also tend to have incredibly affordable fee structures.
With these core options, you’ll even get the dividends that the 500 components of the S&P 500 generate, which adds up to 1.5% annually right now.
Looking beyond these “core” funds, it’s worth noting that there are also a bunch of S&P 500 ETFs out there that start with the list of 500 domestic leaders and add small but important twists on the portfolio.
At the risk of stating the obvious, that means these funds will not offer one-to-one tracking of the index. It also means that in some cases you may be shouldering a higher expense ratio by the ETF manager, depending on the complexity of the product. These can be referred to as tactical S&P 500 ETFs.
How to Choose an S&P 500 ETF
Here are the key points to compare between potential S&P 500 ETFs before you invest.
Expense Ratios
Both passively managed and active ETFs exist—but most S&P 500 ETFs are passively managed by definition. In addition, S&P 500 ETFs are among the largest ETFs by assets with some of the biggest trading volumes in the industry.
Taken together, S&P 500 expense ratios, or the fees charged by funds to cover their operating expenses, are very low. In cases where expense ratios are higher, check to see if the fund’s performance justifies the higher management fee.
Liquidity
Hands-off, buy-and-hold retirement investors don’t need to worry terribly much about ETF liquidity. But if you’re more of an active investor trading in a taxable brokerage account, it’s worth understanding how an ETF’s liquidity could impact your strategy.
Funds with higher average trading volumes are more liquid, and ones with lower trading volumes are less. Choosing an S&P 500 fund that’s more liquid ensures you are able to promptly buy and sell shares without having to give up returns.
Inception Date
The newer the ETF, the shorter the performance track record. Why does that matter for S&P 500 ETFs? Older funds have been through more economic cycles and have been stress tested by wider varieties of market conditions.
By looking back at the performance history of older funds, you can have more confidence about how a fund might perform in future cycles.
Share Price and Investment Minimums
A chief difference between ETFs and index funds is that ETFs generally have no minimums to start investing, and their share prices are fractions of the investment minimums required by many index funds. This means you can start investing in S&P 500 ETFs for just the cost of one share.
That said, the share prices of S&P 500 ETFs vary widely, so new investors may want to ensure that the prices of their ETFs of choice aligns with how they plan to invest. This is especially true if you pursue dollar cost averaging as not all brokerages currently allow clients to buy fractional shares of ETFs.
Dividend Yield
Dividends are a key benefit of investing in the large-cap stocks that comprise the S&P 500. The dividend yield of S&P 500 ETFs represents the percentage the component companies of the benchmark index pay out annually in dividends per dollar you invest in a fund.
When choosing an S&P 500 ETF, make sure their dividend yield is at least aligned with the best funds on this list, if not higher.
What’s the Difference Between ETFs and Index Funds?
The difference between ETFs and index funds comes down to a very short list of features, including liquidity, minimum purchase requirements and availability. Depending on your investing strategy, there are times where one or the other might be more suited to your portfolio.
Liquidity
If you need to take money out of your investment portfolio on a regular basis, an ETF might offer better liquidity than an index fund. You can trade ETFs any time the market is open and can access funds on a standard settlement schedule.
You can only buy and sell the shares of index funds once a day. This is one reason that day traders and institutional investors prefer ETFs.
Minimum Purchase Requirements
Many index funds have investment minimums, sometimes in excess of $1,000—although there are more and more index funds that offer $0 minimums, especially in workplace retirement funds like a 401(k).
ETFs are available for purchase at the per-share price, which can be a sliver of an index fund’s minimum investment.
Availability
It’s possible that your employer-sponsored retirement plan only offers index funds. For instance, it’s less common to be able to buy ETFs in workplace plans, though this is changing some.
While these key differences are important to keep in mind, most long-term, buy-and-hold investors will be best suited by whatever S&P 500 fund offers the lowest expense ratio, highest returns and investment minimums that align with their finances.
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S&P 500 ETF FAQs
Why invest in the S&P 500?
The S&P 500 index includes the biggest U.S. companies by market cap, and it’s proven to be remarkably resilient. The 500 or so stocks in the index have seen a net gain of more than 50% over the last five years, despite the pandemic recession and 2022’s market meltdown.
Even though the 500 or so companies in the S&P 500 represent just a small portion of the more than 4,200 publicly listed companies based in the United States, they represent approximately 80% of total U.S. market capitalization.
How can you invest in the S&P 500?
The best way to invest in the S&P 500 is by purchasing shares in one of the ETFs listed above, or by choosing an S&P 500 index fund. Like ETFs, index funds provide you with great diversification, low risk and lower costs.
What’s the difference between the S&P 500 and the DJIA?
The S&P 500 and the Dow Jones Industrial Average are two of the most important stock indexes. They both provide a big-picture view of how the stock market as a whole is performing. The Dow only has 30 components, compared to the 500 companies in the S&P 500.
The DJIA is a price-weighted index, which means it changes value when the shares of its constituent stocks rise and fall in price. The S&P 500 is market-cap weighted, which means it changes in value when the market capitalization of its components increase or decrease.
How much does the S&P 500 pay in dividends?
It’s important to understand that the S&P 500 index does not pay dividends. The companies that make up the index pay their shareholders dividends. If you own an S&P 500 ETF or index fund, the management collects dividends from the S&P 500 companies it owns and distributes them to fund holders.
Of the 500 stocks that make up the S&P 500, more than 400 typically pay out dividends. Note that the dividends paid by these companies fluctuate relatively often, rising and falling with their corporate performance.
The average dividend yield of the companies that make up the S&P 500 is around 1.5%. This is a bit below its average for the last 20 years, although the longer-term historical average dividend yield is much higher.
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