When folks chat about how well the stock market is doing, they’re actually talking about how the S&P 500 is performing.
This important index keeps an eye on the prices of the 500 biggest public companies in the United States. These companies make up a huge chunk of the entire U.S. stock market, about 80% of it.
A lot of folks use exchange-traded funds (ETFs) to invest their money, and many of these ETFs are designed to mimic the performance of the S&P 500. These funds are like the building blocks of many investment portfolios.
Over a long time, it’s really tough to create an investment portfolio that does better than the S&P 500. That’s why a lot of people use it as a kind of measuring stick for their investments.
In fact, there are trillions of dollars invested in funds that try to copy what the S&P 500 is doing.
If you’re thinking about investing in one of these funds, we’ve put together a list of eight of the best S&P 500 ETFs for you to consider right now.
This can help you figure out which one might be the right fit for you.
| S&P 500 ETFs | Net Assets |
|---|---|
| SPDR S&P 500 ETF Trust (SPY) | $382.2 billion |
| iShares Core S&P 500 ETF (IVV) | $336.1 billion |
| Vanguard 500 Index Fund (VOO) | $314.0 billion |
| SPDR Portfolio S&P 500 ETF (SPLG) | $19.3 billion |
| Invesco S&P 500 Equal Weight ETF (RSP) | $37.5 billion |
| SPDR Portfolio S&P 500 Growth ETF (SPYG) | $18.3 billion |
| Vanguard S&P 500 Value Index Fund ETF (VOOV) | $3.4 billion |
| ProShares Short S&P 500 (SH) | $1.9 billion |
What you'll learn:
➤ The Best S&P 500 ETFs
1️⃣ SPDR S&P 500 ETF Trust (SPY)
- Expense Ratio: 0.0945%
- Dividend Yield: 1.52%
- Net Assets: $382.2 billion
SPY is like the OG of ETFs, around since 1993. It’s the biggest ETF in the U.S., with a whopping $382.2 billion in net assets. That’s a lot of investors’ money in one place.
What’s great about SPY is it’s super dependable and easy to trade because of its size and age. In fact, it sees around 81 million shares traded every day!
But here’s the thing, it’s not the cheapest kid on the block with a 0.0945% expense ratio, which means you’ll pay $9.45 in fees for every $10,000 you invest. Still, its size and liquidity make it a go-to for active traders.
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2️⃣ iShares Core S&P 500 ETF (IVV)
- Expense Ratio: 0.03%
- Dividend Yield: 1.56%
- Net Assets: $336.1 billion
IVV is like SPY’s little sibling, but it’s the second-largest ETF in the U.S. with $336.1 billion in net assets. They both hold pretty much the same stuff, but IVV has a lower cost.
With an expense ratio of 0.03%, you only pay $3.00 in fees for every $10,000 you invest. The trade-off? It’s not as liquid, so it’s not the best choice if you’re an active trader.
3️⃣ Vanguard 500 Index Fund (VOO)
- Expense Ratio: 0.03%
- Dividend Yield: 1.59%
- Net Assets: $314.0 billion
VOO is in the same league as SPY and IVV, with $314.0 billion in net assets. It’s got the same low expense ratio of 0.03% as IVV, making it super cost-effective.
The difference mainly comes down to who you prefer – Vanguard or BlackRock’s iShares. They all have similar returns and dividend yields.
4️⃣ SPDR Portfolio S&P 500 ETF (SPLG)
- Expense Ratio: 0.02%
- Dividend Yield: 1.57%
- Net Assets: $19.3 billion
SPLG offers the same stuff as the big players, but it’s cheaper. With an expense ratio of 0.02%, it’s even more budget-friendly than IVV and VOO.
The catch? It’s not as massive, with $19.3 billion in net assets. If cost is your top priority, this one’s worth considering.
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5️⃣ Invesco S&P 500 Equal Weight ETF (RSP)
- Expense Ratio: 0.20%
- Dividend Yield: 1.80%
- Net Assets: $37.5 billion
The S&P 500 is heavy on the big guys like Apple and Microsoft, but RSP goes for a more balanced approach. It equal-weights all the 500 components, which means no one company dominates.
But this comes at a cost – a higher expense ratio of 0.20%. So, if you want more diversification, this might be your play.
6️⃣ SPDR Portfolio S&P 500 Growth ETF (SPYG)
- Expense Ratio: 0.04%
- Dividend Yield: 1.15%
- Net Assets: $18.3 billion
SPYG is all about the growth game. It focuses on the growth stocks in the S&P 500, so it’s pickier and only holds the companies with the best growth numbers.
At 0.04%, it’s not much more expensive than the low-cost core S&P ETFs.
7️⃣ Vanguard S&P 500 Value Index Fund ETF (VOOV)
- Expense Ratio: 0.10%
- Dividend Yield: 1.95%
- Net Assets: $3.4 billion
Value investing is the name of the game for VOOV. It looks for underpriced stocks with solid balance sheets.
However, it’s a bit pricier with a 0.10% expense ratio. Still, for many investors, it’s quite affordable.
8️⃣ ProShares Short S&P 500 ETF (SH)
- Expense Ratio: 0.89%
- Dividend Yield: 3.55%
- Net Assets: $1.9 billion
SH is like the anti-S&P 500. It aims to do the opposite of what the S&P 500 does each day. It’s not for the long run; it’s for short-term moves. On big down days in the stock market, this ETF can shine.
But beware, it’s not for the faint-hearted and costs more at 0.89%. Day traders and pros use it for tactical plays, not for the long haul. It uses complex derivatives instead of stocks, which is why it’s more expensive.
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➤ What are S&P 500 ETFs?
S&P 500 ETFs are a type of investment known as exchange-traded funds that aim to mirror the performance of the S&P 500 Index, a key benchmark in the stock market.
These ETFs first appeared in 1993 with the launch of the SPDR S&P 500 ETF Trust, commonly known as SPY. SPY is not only the largest ETF in the U.S. but also the most popular, with the highest net assets and daily trading volume.
Most ETFs are essentially index funds designed to replicate the performance of a market index. Fund managers assemble a collection of securities that mimic the composition of a benchmark index.
Investors can buy and sell shares of these funds throughout the trading day, much like they would with individual stocks.
The S&P 500 Index, which these ETFs track, is a market-capitalization weighted index, meaning a company’s representation in the index is based on the total market value of its outstanding shares.
Many of the top S&P 500 ETFs use this market-cap approach, although there are some exceptions like RSP, which follows an equal-weight strategy.
➤ Core vs Tactical S&P 500 ETFs
The most popular S&P 500 ETFs are considered core investments as they closely follow the S&P 500 index, aiming for minimal tracking errors. These core ETFs typically come with affordable fees.
In addition to these core funds, there are S&P 500 ETFs that introduce subtle variations to the portfolio, which sets them apart.
These ETFs do not offer a one-to-one match with the index, and their expense ratios may be higher, depending on their complexity. These are often referred to as tactical S&P 500 ETFs.
➤ How to Choose the Best S&P 500 ETF
When selecting an S&P 500 ETF, consider the following key factors:
Expense Ratios: Most S&P 500 ETFs are passively managed, and they tend to have very low expense ratios. Ensure that the fund’s performance justifies any higher management fees.
Liquidity: Liquidity matters more for active traders, so assess an ETF’s liquidity if you plan to trade frequently.
Inception Date: Older ETFs have a longer performance track record and may have weathered more economic cycles.
Share Price and Investment Minimums: ETFs often have lower minimum investment requirements and more flexibility regarding share prices.
Dividend Yield: Consider the dividend yield of S&P 500 ETFs, which represents the annual dividend payout of the index’s component companies per dollar invested.
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➤ ETFs vs Index Funds
The distinction between ETFs and index funds primarily lies in their liquidity, minimum purchase requirements, and availability.
ETFs offer more liquidity and flexibility for traders, while index funds often have minimum investment thresholds. Your choice between these investment vehicles depends on your strategy and financial situation.
For long-term, buy-and-hold investors, the best S&P 500 fund typically offers the lowest expense ratio, highest returns, and investment minimums aligned with your financial goals.
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