Much has been made of S&P 500 performance being driven by a handful of Big Tech stocks, including Nvidia Corp. (ticker: NVDA), Microsoft Corp. (MSFT), Apple Inc. (AAPL), Alphabet Inc. (GOOG, GOOGL) and Amazon.com Inc. (AMZN).
Although index concentration is at a high level, S&P 500 performance has historically been driven by a relatively small number of companies. As you’d imagine, those companies change over time. For example, in 1970, International Business Machines Corp. (IBM), AT&T Inc. (T), General Motors Co. (GM), Exxon Mobil Corp. (XOM), known simply as Exxon at the time, and an earlier iteration of the Eastman Kodak Co. (KODK) led the index.
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Naturally, S&P 500 performance ebbs and flows, but throughout market cycles, exposure to large-cap U.S. stocks has been a reliable component of diversified portfolios.
While many investors associate exchange-traded funds, or ETFs, with S&P 500 index exposure, mutual funds that you might find in 401(k) plans can also facilitate inclusion of large domestic equities.
What the S&P 500 Is, and Isn’t
S&P index funds are a key component of diversified portfolios.
However, despite the widespread moniker “the benchmark index,” investors should be aware that the index tracks one asset class: large U.S. stocks. In other words, an individual investor should be more focused on meeting longer-term goals, often retirement, rather than beating the S&P 500. So, achieving broader investment goals typically means diversification beyond the S&P 500.
“Many investors might want to stick with familiar, recently successful approaches, such as passive exposure to the S&P 500 index. However, a more diversified investment strategy could offer better risk-adjusted returns,” wrote Lisa Shalett, chief investment officer at Morgan Stanley’s wealth management unit, in a January report.
She added that the S&P 500 was richly valued at the time; that continues to be the case, with a forward 12-month price-to-earnings ratio (P/E) of 22.5. That’s above the five-year average of 20 and the 10-year average of 18.7.
Aligning With Your Investing Style
There’s no one-size-fits-all approach to investing in the S&P 500.
“When comparing S&P 500 mutual funds, it’s less about finding a ‘winner’ and more about choosing the fund that fits your investing style,” says Preston D. Cherry, founder and president of Concurrent Wealth Management in Houston, and author of “Wealth in the Key of Life: Finding Your Financial Harmony.”
“Since they all track the same index, the key differences come down to things like investment minimums, tax efficiency, tracking accuracy and investor behavior,” he adds.
Here are five funds that have tracked the S&P 500 with long-term records of success:
| Fund | Expense Ratio |
| Vanguard 500 Index Fund Admiral Shares (VFIAX) | 0.04% |
| Fidelity 500 Index Fund (FXAIX) | 0.015% |
| T. Rowe Price Equity Index 500 (PREIX) | 0.18% |
| Schwab S&P 500 Index Fund (SWPPX) | 0.02% |
| Vanguard S&P 500 ETF (VOO) | 0.03% |
Vanguard 500 Index Fund Admiral Shares (VFIAX)
Vanguard’s flagship fund is a reliable option for long-term investors, Cherry says. Its expense ratio of 0.04% stacks up favorably with ETFs, which are generally assumed to be cheaper.
“Costs are among the lowest, and it mirrors the S&P 500 closely, making it a good fit for investors who want full participation in both market ups and downs,” Cherry says.
The fund’s $3,000 minimum may be a barrier for some, he adds. “But investors who meet it benefit from Vanguard’s straightforward, disciplined approach and structure that supports patient behavior,” Cherry says.
Fidelity 500 Index Fund (FXAIX)
For investors with accounts at Fidelity, such as those whose 401(k) plans are held at the brokerage, this mutual fund is frequently a core holding.
“Fidelity is one of the largest players in the employer-sponsored retirement space, so this fund often serves as the default S&P 500 option for millions of savers,” says Emilio Cabuto, a financial planner at Verus Capital Partners in San Diego. Cabuto notes that its expense ratio of 0.015% makes this one of the cheapest S&P 500 mutual funds on the market.
“For investors who prefer simplicity and want to keep everything under one roof, whether that’s within an individual brokerage account, Roth IRA or employer-sponsored plan like a 401(k), FXAIX offers excellent long-term exposure at a very cheap cost,” Cabuto says.
[Read: 7 Best Index ETFs to Buy Now]
T. Rowe Price Equity Index 500 (PREIX)
This fund has a higher expense ratio, 0.18%, than rival products. “While still relatively low compared to actively managed funds, there’s really no reason to choose it over a fund with a lower expense ratio unless it’s the only one offered in a retirement plan such as a 401(k),” says Jake Skelhorn, partner and wealth advisor at Spark Wealth Advisors in Jacksonville, Florida.
Still, there’s no denying PREIX is a long-term winner: Its 15-year annual average return is 13.9% as of Dec. 12. Its three-year annualized return is 21.1%, well above its category average.
A minimum initial investment of $2,500 may be a hurdle to some investors, although inside a 401(k), that minimum is typically waived.
Schwab S&P 500 Index Fund (SWPPX)
For Schwab clients, SWPPX is a solid choice, Cabuto says. “It’s the only one of the major S&P 500 mutual funds that trades without a transaction fee on the Schwab platform, making it the most cost-effective option for investors already in the ecosystem,” he says.
Cabuto adds that this fund’s expense ratio of 0.02% is extremely low, and the share price, currently around $17, makes it approachable for newer investors who like owning a higher number of shares rather than fractional units.
Vanguard S&P 500 ETF (VOO)
No list of inexpensive top S&P 500 index funds would be complete without a Vanguard ETF. As is common with funds in the Vanguard family, VOO has a low expense ratio; in this case, it’s 0.03%. That low cost means investors keep more money relative to some other S&P index fund choices.
“It’s nearly costless at scale, and the ETF structure adds tax efficiency by minimizing capital gains distributions,” says Cabuto. “Because it trades intraday, VOO also offers flexibility for retirees or taxable investors who may want to sell shares strategically. It’s broadly available outside Vanguard, which is an added advantage for investors consolidating accounts.”
With a gold, four-star rating from Morningstar and $1.5 trillion in assets, it’s easy to see why this fund is one of the most popular choices for hands-off investors.
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5 Best S&P 500 Index Funds to Buy for 2026 originally appeared on usnews.com
Update 12/15/25: This story was previously published at an earlier date and has been updated with new information.
