How to Invest in the S&P 500 in 2025

Investing in the S&P 500 index is one of the best ways to gain exposure to the US stock market. The gauge, which tracks the performance of 500 large-cap stocks, such as Apple, Nvidia and Microsoft, covers about 80% of the total market capitalization of US public companies. It’s also one of the most-watched stock market indices in the world and provides an indication of the overall health of the US economy.

The S&P 500 has a history of impressive growth, even though wide-reaching tariffs President Donald Trump imposed on US trading partners caused a stock market turmoil and weighed on its performance. The index has increased 158.5% over the past decade, which is not to be sniffed at. However, you can’t directly invest in the S&P 500 index. It would also be hard to invest in 500 individual companies to replicate its performance. Fortunately, you can get all the benefits by investing in index funds and exchange traded funds (ETFs) that track the index.

In this guide, we’ll show you exactly how to invest in the S&P 500, using various S&P 500 index funds and ETFs.

What is the S&P 500? 

Founded in 1975, it’s the granddaddy of US market-cap-weighted indexes. To be included in the index, a company must be based in the US and have a market cap of at least $18 billion.

The Standard & Poor’s 500 is a float-weighted index. This means that the market capitalizations of the companies in the index are adjusted by the number of shares available for public trading. Each company in the index must have at least 10% of its shares available for public trading. They also need to show positive earnings over the trailing four quarters.

There are a total of 500 companies in the index but more than 500 stock tickers because several companies have more than one stock symbol, for different series of their shares.

Some of the main S&P 500 members and their year-to-date performance

Some of the major outperformers of the S&P 500 this year

This shows that while several stocks may perform better than the S&P 500 in a given year, it’s best to invest in the index for steady growth over a longer time period.

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Why invest in the S&P 500? 

The allure of the S&P 500 is multifaceted. First, as the index includes companies across a broad range of industries and sectors, it offers diversification, a key risk-mitigation strategy for all investors. Spreading your investment across hundreds of companies will reduce risk compared to putting your money into just a few stocks. Being exposed to the combined performance of 500 large-cap US companies through an index fund or ETF provides significant diversification, reducing risk compared to picking individual stocks.

Second, the S&P 500 has a history of decent growth. Also, S&P 500 index funds or ETFs that track the index have a solid track record of good returns over the long term, often outperforming individual stocks. 

Finally, index funds and ETFs that track the S&P 500 typically come with low fees, keeping more of your hard-earned returns in your pocket.

Using such index funds or ETFs is one of the simplest ways to invest in the stock market and these financial instruments typically have lower expense ratios than actively managed funds, helping investors to keep more of their investment gains. S&P 500 index funds and ETFs are widely available through various brokerage accounts, making them accessible to many investors.

Historical performance of the S&P 500

The S&P 500 has posted an average annualized return of around 11.95% over the past 50 years, including dividends. Though the trend for the index has been up, it has still experienced significant volatility over the years, with both major ups and downs. During the bursting of the dot-com bubble of the late 1990s, and the financial crisis of 2008, the index saw sharp declines. Obviously, this year has also seen a significant drop of more than 9%.

Despite these fluctuations, the S&P 500 has generally trended upward over the long term, demonstrating its potential for growth. The following chart shows the index’s total return gain since 1990:

What is the 10-year average annualized return of the S&P?

The index has an annualized return of 12% over the past decade. An investment of $100 in the S&P 500 Index a decade ago would be worth more than $391 today.

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2 ways to invest in the S&P 500 in 2025: Index funds and ETFs 

For investors looking to replicate the performance of the S&P 500 in their portfolio, ETFs and index funds are viable options.

Investing through an S&P 500 index fund

An S&P 500 index fund is a form of passive investment that tracks this US stock market benchmark. The financial institution that manages the index fund will invest in the shares of the companies that make up the index. This also means that the assets within the index are fixed and determined by its composition and weightings.

Benefits of S&P 500 index funds include diversifying investments because the index includes companies from many sectors. It’s a good choice for investors with a long-term perspective who are able to remain unphased by rises and falls of the index’s value. S&P 500 index funds are available through brokerages and asset management firms.

Investing via an S&P 500 ETF

Investing into the benchmark US stock index via an ETF means buying an ETF from an investment platform or app. The manager of the ETF buys stock in every member of the index and compiles a basket of stocks using the same weightings as the index. Then it lists this ETF on an exchange. The investor’s money will rise or fall with the S&P 500.

Popular choices include the SPDR S&P 500 ETF Trust (SPY), Vanguard 500 Index Fund ETF Shares (VOO), and iShares Core S&P 500 ETF (IVV). You can track the ETF’s value and returns through your brokerage account or financial websites.

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Investing in the S&P 500 with an index fund: a 6-step guide 

Step 1: Understand your goals

Start by understanding how the S&P 500 works and how it aligns with your financial objectives. This knowledge will guide your investment strategy. If you’re looking to add diversification to your portfolio, an index fund that tracks the S&P 500 index is a great place to start. 

Step 2: Choose an investment account

Select an account like a brokerage, IRA, or 401(k) to hold your S&P 500 investments. Not all brokers have access to S&P 500 index funds, though most do.

Step 3: Research various index funds

There are plenty of index funds out there that track the S&P 500 Index, but they vary widely, mostly by their expense ratios. While past performance doesn’t guarantee future success, it makes sense to look at index funds that have a solid track record.

Each index fund’s expense ratios can make a big difference in performance. A good expense ratio for a mutual fund is less than 1%. For example, while there are index funds with no expense ratios, some that are actively managed have expense ratios of 0.52% or higher. This means that on an investment of $1,000, the annual expenses could cost you $52 a year.

Many brokers provide research on index funds. Many offer a fund search tool where you can filter by fund type (index fund), market capitalization (S&P 500), and other criteria. Take a look at each fund’s profile, which shows the funds’ objectives, investment strategy, expense ratio and performance history. Many platforms also provide ratings on various index funds that include analyst reports.

Step 4: Choose your S&P 500 index fund

Pay attention to these popular index funds

Popular funds that track the S&P 500 include the Fidelity 500 Index Fund (FXAI), the Vanguard 500 Index Fund Admiral Shares (VFIA) and the Fidelity Flex 500 Index Fund (FDFIX).

The Fidelity 500 Index Fund has a low 0.015 expense ratio and requires no minimum investment, making it easily accessible to all investors. So far this year, it has a total return of -13.43%. It normally invests at least 80% of assets in common stocks included in the S&P 500 Index and has 507 holdings, making it quite diverse.

The Vanguard 500 Index Fund Admiral Shares has an ultralow expense ratio of 0.04%, but it requires a minimum investment of $3,000. It currently holds 540 stocks. So far this year, its performance is a return of -13.43%.

The Fidelity Flex 500 Index Fund has no expenses, so an expense ratio of 0.00%. It currently holds 507 stocks. There’s no minimum investment requirement and its return so far this year is -13.42%.

Step 5: Make your trades

Once you’ve chosen your approach, use your investment account to buy shares of S&P 500 index funds. It’s important to think long-term when purchasing S&P 500 index funds as many of them outperform individual stocks over a period of time. 

Step 6: Monitor and rebalance

Regularly review your investments to ensure they remain aligned with your goals. The S&P 500 is broad, so diversification is key. Rebalance your portfolio as needed to maintain your desired asset allocation.

Investing in the S&P 500 with an ETF: 6 easy steps

Getting exposure to the S&P 500 with an ETF is very similar to investing in the S&P 500 with an index fund.  You’re looking for ETFs that track the S&P 500 Index, have a low expense ratio and a proven record of success. Follow these five steps:

Step 1: Understand your investment goals

Focus on why you’re buying an ETF that tracks the S&P 500. Are you looking for a long-term investing strategy that doesn’t require a lot of management on your part? Does your portfolio need additional diversification beyond what you already own? The key is an ETF that tracks the S&P 500 Index may fit with a lot of investment profiles.

Step 2: Choose your brokerage

Not all brokers offer an array of ETFs, so if you’re at the beginning of your investing career, make sure the broker you choose offers plenty of educational opportunities, low fees and the ability to trade an assortment of ETFs.

Step 4: Choose your ETF

Though the ETFs that track the S&P 500 may have similar track records, it’s important to understand that your own performance may depend on an ETF’s fees, how much you’re able to invest and other factors. This step is the most crucial. Beginners often start with index ETFs, like those tracking the S&P 500, as they offer broad market exposure. ETFs typically have higher expense ratios than mutual funds, so pay attention to the annual fee that each ETF charges to manage the fund. 

Pay attention to three popular S&P 500 Index ETFs:

One of the most popular ETFs in the world is the SPDR S&P 500 ETF Trust (SPY). Launched in 1993, it is the oldest ETF in the US with $512.36 billion in assets under management (AUM). Many large institutional investors have some of their holdings in this ETF. It has 503 holdings, an expense ratio of 0.0945% and is down 13.78% so far this year. 

Another popular S&P 500 Index ETF is Vanguard’s S&P 500 ETF (VOO), which features an expense ratio of only 0.03% and is down roughly 13.82% this year. It has 1.3 trillion in AUM. Vanguard is a pioneer in ETFs and closely tracks the S&P 500 Index. The one downside is it trades at more than $464 a share, so unless your broker allows you to buy partial shares, it can be expensive to buy into. It is also available as an Admiral Shares mutual fund.

The iShares Core S&P 500 ETF (IVV) the US-based ETF has more than $527.02 billion in AUM. Its expense ratio is 0.03% and it is down roughly 13.44% this year. It has 503 holdings and is priced at more than $507 per share.

Step 5: Make your trades

ETFs can be bought whenever the markets are open, so it’s a relatively easy process. Depending on your broker, your choice may come down to what is offered and if there are any promotions that feature a S&P 500 Index ETF.

Step 6: Monitor your portfolio

Index ETFs are not designed for frequent trading, but it still makes sense to monitor your ETFs and rebalance your portfolio accordingly. While these ETFs provide broad diversification to large-cap US companies, it may make sense to make sure you have exposure to mid-cap and small-cap stocks, as well as international stocks.

Investing in an S&P 500 index fund or S&P 500 ETF: which is better? 

This isn’t a simple answer because many S&P 500 index funds and S&P 500 ETFs have more similarities than differences, including low fees. In some cases, ETFs, because they are traded in real time, provide more flexibility, but the initial investment can be more expensive. S&P Index funds are only traded once a day, but can be purchased for as little as $1.

The fees on both index funds and ETFs are low, especially when compared to actively managed funds. Many ETFs track an index, and this investment style keeps fees low. Since the fund changes based only on changes to the index – a passive approach – there are few labor costs associated with index funds. Ultimately, the best decision for you may come down to the individual fund or ETF.

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Benefits and drawbacks of investing in the S&P 500

Index funds and index ETFs are investments that track a specific stock market index, such as the S&P 500. By investing in an index fund or an ETF that tracks an index, you’re essentially buying a piece of every company in that index. This offers a diversified approach to investing, as it spreads your risk across multiple companies. There are pros and cons of investing in the S&P 500.

Pros of investing in an S&P 500 Index fund or ETF

• Long-term returns: Over time, the S&P 500 has consistently shown growth, making it a reliable investment option.

• Hands-off approach: Index funds and ETFs require minimal management, making them ideal for investors who prefer a passive investment strategy.
• Diversification: By investing in an index fund or ETF that tracks the S&P 500, you automatically gain exposure to hundreds of profitable large-cap companies, reducing your risk.

Cons of investing in an S&P 500 Index fund or ETF

• You lose individual stock control: If you want to pick and choose specific companies, an index fund or ETF that tracks an index may not be the best choice.
• No exposure to mid-cap and small-cap stocks and international stocks. This may mean your portfolio will lack diversification, unless you also broaden your portfolio.

Ultimately, the decision to invest in an S&P 500 index fund or ETF depends on your individual investment goals and risk tolerance. If you’re looking for a low-maintenance, diversified investment strategy with long-term potential, an index fund or ETF could be great options.

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How much does it cost to invest in the S&P 500?

There are ways to invest in the S&P 500 for as little as $1 as some S&P 500 index funds require no minimum investment, though some require as much as $3,000 to begin investing. S&P 500 Index ETFs vary widely in price, though some of the most popular ones cost at least $500 a share.

The cost of investing in an S&P 500 index fund

You can begin investing in an S&P 500 index fund for as little as $1, or pay as much as $3,000 to begin your investment.

The cost of investing in an S&P 500 ETF

The minimum cost of investing in a S&P 500 ETF is the cost of one share of the ETF, which varies from under $100 to above $500 a share.

The price of investing in individual stocks within the S&P 500

There’s a huge range of prices for the individual stocks within the S&P 500, from slightly more than $7 a share for drugmaker Viatris to more than $7,200 a share for homebuilder NVR.

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FAQs on investing in the S&P 500

Can I invest in the S&P 500 index from outside the US?

Certainly. There are plenty of international brokers that will allow you to purchase S&P 500 Index funds and ETFs. Check the company’s website to be sure.

What if I invested $100 a month in S&P 500?

That’s a great place for new investors to start. Consistent investing such as investing $100 a month in a S&P 500 Index fund or ETF is a relatively safe way to build long-term wealth, particularly if you are consistent regarding your investments.

Can you invest directly in the S&P 500?

No. You cannot invest directly into the S&P 500 Index, but there are plenty of S&P 500 Index funds and ETFs that track the index that you can invest in. In addition, you can invest in individual companies that are in the S&P 500 Index, though investing in individual companies means more risk than investing in an index fund or ETF.

What is a good time to invest in the S&P 500 index?

There’s really no bad time to invest in the S&P 500 index through an ETF or index fund, as long as you keep a long-term approach to investing. While the S&P 500 is occasionally volatile and has seen big drops during recessionary periods, over the long run, it outperforms many individual companies.

What’s the best performing S&P 500 stock so far this year?

Newmont Corporation, a mining company based in Denver, Colo., has benefitted from record gold prices this year as it is the only gold producer listed in the S&P 500. Its total return is up more than 47% so far this year. It has 17 managed mining operations in nine countries. It reported net income of $3.35 billion in 2024, up 234%.

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References

• S&P 500’s growth
• Fidelity 500 Index Fund
• Fidelity Flex 500 Index Fund
• Vanguard 500 Index Fund Admiral Shares
• SPDR S&P 500 ETF Trust
• Vanguard S&P 500 ETF
• iShares Core S&P 500 ETF
• Newmont Corporation 2024 earnings