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:

• 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

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.

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

#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

#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

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.

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.