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The 3 Best S&P 500 ETFs in 2020

Written by Donnie Nguyen

February 24, 2020

Why Invest in the S&P 500 Index

A low-cost S&P 500 index fund is one of the best ways to grow your portfolio. With the advent of zero-commission trading and fractional-share investing, ETFs (exchange-traded funds) have become a great way to invest in the S&P 500 – perhaps even better than mutual funds.

Here are 3 reasons to invest in a low-cost S&P 500 index ETF:

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  • The S&P 500 index beats most money managers year after year
  • A $10k investment in the S&P 500 over 50 years would be worth over $1.1 million
  • Warren Buffett plans to leave 90% of his money in the S&P 500 when he’s gone

Credit: CNBC Television

How to Select the Best S&P 500 ETFs

 

When selecting the best S&P 500 ETFs in 2020, here are 3 points to consider:

  • How low are their fees (net expense ratio)? The lower the better!
  • What’s their trading volume? Higher trading volume means higher liquidity.
  • How well do they track the S&P 500 Index? They need to be within 1% of the index over the past 5 years to make this list – with one notable exception (see #4).

#1: VOO – Vanguard S&P 500 ETF

  • Issuing Company: Vanguard
  • Net expense ratio: 0.03%
  • Trading volume (average 10-day): 2.5 million

How well does VOO track the S&P 500? The 5-year charts are nearly identical.

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5-Year Overall Performance (as of 2/23/2020)

  • S&P 500: 58.17%
  • VOO: 58.16%

5-Year Chart of VOO vs S&P 500

VOO is a great way to invest in the S&P 500 with it’s super-low 0.03 net expense ratio and superior tracking of the S&P 500 index over the past 5 years. Vanguard has a great reputation for delivering low-cost funds.

#2: IVV – iShares Core S&P 500 ETF

  • Issuing Company: BlackRock
  • Net expense ratio: 0.04%
  • Trading volume (average 10-day): 4.8 million

How well does IVV track the S&P 500? IVV tracks the index very well.

5-Year Overall Performance (as of 2/23/2020)

  • S&P 500: 58.17%
  • IVV: 57.47%

5-Year Chart of IVV vs S&P 500

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IVV is also a great ETF to track the S&P 500. It’s 0.04 expense ratio just makes it a wee bit more expensive than VOO. Nevertheless, it’s still a very inexpensive ETF.

#3: SPY – SPDR® S&P 500 ETF Trust

  • Issuing Company: State Street Global Advisors
  • Net expense ratio: 0.09%
  • Trading volume (average 10-day): 60.8 million

How well does SPY track the S&P 500? It also tracks the index very well.

5-Year Overall Performance (as of 2/23/2020)

  • S&P 500: 58.17%
  • VOO: 57.85%

5-Year Chart of SPY vs S&P 500

SPY is the most well-known ETF that tracks the S&P 500. With it’s 60.8 million average 10-day trading volume, it’s also the most popular. It’s a great ETF, but with a 0.09% expense ratio, it’s more than twice as expensive than VOO and IVV. Even so, it’s still a very inexpensive ETF.

One alternative to consider

#4: SPLG – SPDR Portfolio S&P 500 ETF

  • Issuing Company: State Street Global Advisors
  • Net expense ratio: 0.03%
  • Trading volume (average 10-day): 2.8 million

How well does it track the S&P 500? This one is a little tricky to answer. State Street, the same issuer of the SPY (#3 on this list) is also the issuer of SPLG. They converted their SPDR Portfolio Large Cap ETF to the SPDR Portfolio S&P 500 ETF on January 24, 2020. It’s basically a low-cost version of the SPY. It’s also a great way to gain exposure to the S&P 500 index.

The Bottom Line

Investing in a low-cost S&P 500 ETF is an excellent way to grow your portfolio. With the advent of zero-commission trading and partial-share trading, ETFs could potentially be better than mutual funds for investing in the S&P 500. These 3 top ETFs plus 1 alternative are 4 great ways to invest in the S&P 500.

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Disclosure

I/we do not own any shares of stocks/ETFs discussed in this article.

I wrote this article myself and it expresses my own opinions. I’m not receiving compensation for it (other than from Wolves Of Investing), and I have no business relationship with any company whose stock is mentioned in this article.

What do you think about index investing in the S&P 500? Do you own any of these ETFs? Leave a comment and share this post on your favorite social media site if you found it helpful! Thanks for reading.
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Donnie Nguyen

Donnie Nguyen

Donnie Nguyen is the founder and CEO of Wolves of Investing. He started investing in the stock market in the early 2000s. He follows the teachings of Peter Lynch, Warren Buffett, and other investing legends. When he's not investing or blogging, he loves spending time with his family traveling and experiencing the world.

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