The S&P 500 is getting a refresh: Robinhood Markets Inc. (ticker: HOOD), AppLovin Corp. (APP) and Emcor Group Inc. (EME) are set to join the large-cap index before the market opens on Sept. 22.
The S&P 500 rebalances quarterly, adding or removing companies and adjusting weightings, to ensure the index accurately tracks the performance of the U.S. stock market.
The three new companies will replace Caesars Entertainment Inc. (CZR), MarketAxess Holdings Inc. (MKTZ) and Enphase Energy Inc. (ENPH), which are being downgraded to the S&P SmallCap 600 Index.
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After Sept. 22, Robinhood, AppLovin and Emcor will be components of S&P 500 index funds, although in the market capitalization-weighted index, they’ll be much smaller components relative to S&P 500 giants like Nvidia Corp. (NVDA), Microsoft Corp. (MSFT) and Apple Inc. (AAPL).
Investors who want S&P 500 exposure can choose between several mutual funds and exchange-traded funds, or ETFs.
Virtually Identical Fund Holdings
An investor considering a purchase of an S&P 500 fund should understand that their holdings are all nearly identical. That means an investor’s return should also be nearly identical, says Danny Smyth, managing director of the East Coast division of Los Angeles-based HCR Wealth Advisors.
Smyth points out that investors have the option of buying an exchange-traded fund or a mutual fund. “Both are subject to capital gains tax and taxation of dividend income. However, ETFs are structured in such a manner that taxes are minimized for the holder of the ETF because they typically have fewer capital gains distributions,” he says.
Even for S&P mutual funds, tax implications are minimal because portfolio turnover is minimal.
ETFs Offer More Trading Flexibility
“Another consideration is that ETFs provide more trading flexibility than a traditional mutual fund,” Smyth says. “ETFs trade throughout the day on the stock exchange just like individual stocks, allowing for immediate buying and selling of shares and the ability to react quickly to market movement.”
Mutual funds do not offer intraday trading, which can be a limiting factor for some investors, although long-term holders wouldn’t be affected.
Here’s a look at three S&P 500 index ETFs and two index mutual funds:
| S&P 500 Index Fund | Expense Ratio |
| SPDR S&P 500 ETF (SPY) | 0.095% |
| iShares Core S&P 500 ETF (IVV) | 0.03% |
| Vanguard S&P 500 ETF (VOO) | 0.03% |
| Fidelity 500 Index Fund (FXAIX) | 0.015% |
| Schwab S&P 500 Index Fund (SWPPX) | 0.02% |
SPDR S&P 500 ETF (SPY)
State Street’s $655 billion SPY ETF is structured as a unit investment trust, or UIT. That means it has tax implications you won’t find in other S&P 500 ETFs. A UIT is required to distribute capital gains to shareholders annually. If the fund’s manager sells securities at a profit, the trust must pass those gains on to investors, even if the investor hasn’t sold their own shares.
That means SPY shareholders could owe taxes on gains they didn’t personally realize, as they didn’t sell any shares themselves. Still, SPY gets five out of five stars from Morningstar and pays a modest 1.1% trailing-12-month yield.
“Although not the lowest-cost S&P 500 ETF, it still consistently has the volume, liquidity and history that many institutional investors and retail investors find appealing,” says Jonathan Dane, founder and chief investment officer at Defiant Capital Group in Warrendale, Pennsylvania.
“In addition, it provides one of the most active S&P 500 options markets, which further solidifies its role as a key S&P 500 ETF,” Dane says.
iShares Core S&P 500 ETF (IVV)
BlackRock’s iShares version of an S&P 500 index ETF saw $7.9 billion in inflows in August. With $664 billion in assets under management, it’s slightly larger than SPY. Its low expense ratio of 0.03% may be a factor in its growing popularity. A top rating from Morningstar and a trailing-12-month yield of 1.2% may help as well.
Unlike SPY, IVV uses an open-end ETF structure. This allows it to reinvest dividends immediately or earn extra income from securities lending. That gives this ETF the potential to boost performance over time.
Vanguard S&P 500 ETF (VOO)
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 Emilio Cabuto, financial planner at Verus Capital Partners in San Diego. “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, five-star rating from Morningstar and $1.4 trillion in assets, it’s easy to see why this fund is one of the most popular choices for hands-off investors.
Fidelity 500 Index Fund (FXAIX)
As inexpensive as the Vanguard ETF is, Fidelity’s S&P 500 mutual fund boasts an even lower expense ratio of 0.015% along with a 1.2% trailing-12-month yield. Another advantage: Although mutual funds don’t offer intraday trading, they allow for more efficient dollar-cost averaging.
“For investors building wealth through regular contributions, FXAIX is one of the easiest ways to stay disciplined,” Cabuto says. “Mutual funds are purchased in dollar amounts, and you can buy fractional shares. That means 100% of your contribution is invested right away, with no cash left sitting idle.”
Rated five out of five stars by Morningstar, this fund is also popular, with $696 billion in assets as of Sept. 8.
Schwab S&P 500 Index Fund (SWPPX)
This $124 billion fund has no investment minimum other than its share price, so younger or newer savers can easily begin putting money into it. SWPPX also pays a trailing yield of 1.1%.
Trading between $16 and $17, SWPPX has a low net asset value (NAV), or price, because Schwab has deliberately issued more shares to keep the per-share price accessible for smaller investors. NAV simply reflects the price of one share, not the fund’s total value or return.
“Given the low NAV, or price, it is a nice way for users on Schwab to be able to deploy small dollar amounts into the broader S&P 500 on a regular basis, for example, making $25 monthly contributions,” Dane says.
Morningstar also gives SWPPX five out of five stars on its rating scale.
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5 Best S&P 500 Index Funds to Buy Now originally appeared on usnews.com
Update 09/09/25: This story was previously published at an earlier date and has been updated with new information.
