The S&P 500 tracks large-cap U.S. stocks and serves as a core building block in many portfolios. While it represents just one segment of the market, it’s a go-to for U.S. investors.
You have plenty of choices for accessing the S&P 500.
“When it comes to choosing an index fund, a simple rule of thumb is to go with the option offered by your broker or custodian, so you can try to avoid unnecessary transaction fees,” says Steven Rogé, chief investment officer and CEO at R.W. Rogé & Co. in Beverly, Massachusetts.
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For example, he says, for Fidelity clients, the Fidelity 500 Index Fund (ticker: FXAIX) may be a smart pick since it typically comes with no transaction costs.
However, Rogé cautions, not all index funds or share classes are built the same.
“You might see retail, advisor or institutional share classes, each with different expense ratios and minimum investment requirements, even within the same fund family,” he says. “Most index funds do a solid job tracking their benchmarks, but differences in things like securities lending practices can impact returns.”
The key, Rogé says, is to choose a low-cost, no-transaction-fee option that aligns with your broader investment goals and investment strategy.
Here’s a closer look at five mutual funds offering exposure to the widely followed S&P 500:
| S&P 500 Index Fund | Expense Ratio |
| Vanguard 500 Index Fund Admiral Shares (VFIAX) | 0.04% |
| Fidelity 500 Index Fund (FXAIX) | 0.015% |
| Schwab S&P 500 Index Fund (SWPPX) | 0.02% |
| Principal LargeCap S&P 500 Index Fund (PLSAX) | 0.33% |
| T. Rowe Price Equity Index 500 Fund (PREIX) | 0.18% |
Vanguard 500 Index Fund Admiral Shares (VFIAX)
Investors looking for a low-cost option should consider this fund. Its expense ratio is just 0.04%, in keeping with Vanguard’s company-wide reputation for low fees. There are no sales fees or front-end loads.
Gabriel Shahin, founder and principal at Falcon Wealth Planning in Ontario, California, says VFIAX is a sound option as it closely tracks the S&P 500 and the cost is low. Because Vanguard is shareholder-owned, any profits generated, including through securities lending, are ultimately returned to the funds.
Overall, Shahin adds, an index fund is the right approach to get exposure to large domestic stocks.
“Because U.S. large cap is such an efficient market, I would avoid any active tilts and try to achieve the market-like return in the most efficient way possible,” he says.
Fidelity 500 Index Fund (FXAIX)
This fund boasts an expense ratio of 0.015%, even lower than the Vanguard fund’s fee.
That could make this fund attractive for cost-conscious investors, as it’s the lowest among the most liquid index funds, says John Murillo, chief dealing officer at B2Broker, a trading platform headquartered in Dubai. In addition, the fund has no minimum investment, meaning those new to the market can gradually build up a position through regular contributions or dollar-cost averaging.
Dividend distributions are made four times a year, in April, July, October and December. FXAIX’s trailing-12-month yield is 1.3%.
Schwab S&P 500 Index Fund (SWPPX)
Nearly all liquid S&P 500 index funds are suitable for investors who want broad market exposure with a low-cost, diversified portfolio, Murillo says.
“They work best for long-term investors who also prioritize minimizing investment costs,” he says, adding that the Schwab S&P 500 Index Fund is a good option, as it has no minimum investment requirement.
In addition to being appropriate for investors who want to start small, Charles Schwab also makes fractional shares available, making it even easier to get started with limited capital.
This fund’s expense ratio is 0.02%. It distributed dividends annually, in December, and its trailing yield is 1.3%.
Principal LargeCap S&P 500 Index Fund (PLSAX)
Principal’s S&P 500 funds are available in several share classes, accessible by individual investors as well as through qualified retirement plans or investment advisors.
The funds’ fee structures can vary, but the PLSAX fund, aimed at individual investors, carries a heftier price tag than some others. Its expense ratio is 0.33%, and there’s a front-end load of 1.5%. The minimum investment is $1,000.
This fund distributes both dividends and capital gains in December, on two different dates. This annual distribution approach isn’t unusual for index funds, which often have low turnover and few realized capital gains throughout the year.
“Taxable accounts might not be the best home for certain S&P index funds,” says Matthew Thornton, an investment advisor at WSFS Bank, based in Bryn Mawr, Pennsylvania. “If you happen to be relying on income generated from your investments to cover monthly expenses, there are some funds that could better suit your needs,” he adds.
However, PLSAX is rated four stars by Morningstar and has generated superior returns compared with peers, according to the investment research and ratings firm. It has returned an annualized 15.2% over the past five years and has stayed well ahead of its category’s average annual return for the past 15 years. For instance, it beat the 10-year average of its peers by nearly a full percentage point.
T. Rowe Price Equity Index 500 Fund (PREIX)
With an expense ratio of 0.18%, performance of this fund may lag others with a lower fee. “So you could be leaving money on the table over time just by choosing an index fund with a higher expense ratio,” Thornton says. However, PREIX benefits from T. Rowe Price’s strong fund family reputation and is a staple of employer retirement plans. It is also priced in the cheapest fee quintile among its direct peers, according to Morningstar.
It requires a $2,500 minimum from individual investors, but that minimum may be waived or reduced in some cases, such as in individual retirement accounts, custodial accounts for minors and small business retirement plans.
T. Rowe Price is a major 401(k) provider, especially for small to midsize businesses. Employers using T. Rowe Price to administer their retirement plans often include PREIX as the core large-cap index fund option.
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5 Best S&P 500 Index Funds to Buy Now originally appeared on usnews.com
Update 04/24/25: This story was previously published at an earlier date and has been updated with new information.
