Best S&P 500 ETFs | The Motley Fool (2024)

Exchange-traded funds (ETFs) can be a great way to get started investing. These diversified funds are also ideal for laying a foundation for a long-term investment portfolio. However, with thousands of ETFs to choose from, selecting one can be a daunting task.

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Exchange-Traded Fund (ETF)

An exchange-traded fund, or ETF, allows investors to buy many stocks or bonds at once.

That's where an S&P 500 ETF can be handy. Investors worldwide are familiar with the , which is often used as a benchmark for stock market performance. It's also possible to invest in an ETF that closely tracks the performance of this highly regarded index.

Best S&P 500 ETFs | The Motley Fool (1)

Source: Getty Images

Data as of Nov. 22, 2023. Data source: State Street Global Advisors SPDR, iShares, Vanguard, and ProShares.
ETF NameAnnual FeeAssets Under ManagementDescription
SPDR S&P 500 ETF Trust (NYSEMKT:SPY)0.0945%$427 billionThe first ETF in the U.S. and largest ETF by assets managed
iShares Core S&P 500 ETF (NYSEMKT:IVV)0.03%$373 billionAn ETF managed by one of the largest asset managers around
Vanguard S&P 500 ETF (NYSEMKT:VOO)0.03%$319 billionLow-cost S&P 500 ETF option from a pioneer in the retail investing industry
ProShares Short S&P500 (NYSEMKT:SH)0.89%$1.87 billionA fund designed to profit from betting against the S&P 500
Proshares Ultra S&P 500 (NYSEMKT:SSO)0.89%$3.78 billionA fund designed to provide double the daily return of the S&P 500

Investing in SP 500 ETFs

Investing in S&P 500 ETFs

There are a number of advantages to investing in an S&P 500 ETF. The S&P 500 tracks the performance of 500 of the largest U.S.-based companies.

Although there are thousands of stocks listed on a U.S. stock exchange, many investors default to the S&P 500 when assessing the strength of U.S. stocks. That makes sense, given that more than 80% of the total U.S. stock market value comprises these 500 businesses.

Investing in the 500 companies that make up the S&P 500 can be a solid option, too. After all, it takes time and a powerful business to make it on this list of top corporations. Although not all of the S&P 500 companies are problem-free, there are many high-quality stocks within the index.

As of this writing, top stocks in this index run the gamut from big tech companies, such as Microsoft (MSFT -2.07%), Apple (AAPL -0.22%), and Amazon (AMZN -2.42%), to Warren Buffett's industrial conglomerate Berkshire Hathaway (BRK.A 0.92%)(BRK.B 0.34%) and top healthcare companies, such as UnitedHealth Group (UNH 0.37%) and Johnson & Johnson (JNJ -0.65%).

With that in mind, here are five top ETFs that track the performance of the S&P 500 Index.

1. SPDR SP 500 ETF Trust

1. SPDR S&P 500 ETF Trust

The SPDR S&P 500 ETF from State Street Global Advisors was the first ETF to be listed in the U.S. The fund has been available since 1993. Paired with the S&P 500 Index's popularity, this has made the SPDR S&P 500 ETF the largest exchange-traded fund around, with $427 billion in investor funds under management in late 2023.

The SPDR S&P 500 ETF tracks the performance of the S&P 500 Index, less the annual fee, and distributes dividends paid by the companies in the index. The ETF charges 0.0945% per year in annual fees. For every $1,000 invested, that works out to just under $0.95 per year subtracted from the fund's performance.

2. iShares Core SP 500 ETF

2. iShares Core S&P 500 ETF

The iShares Core S&P 500 ETF is another long-tenured U.S. ETF that invests in the stocks of the S&P 500 Index. It offers an almost identical investing product to the SPDR offering, except that iShares' annual fee is even lower at just 0.03% per year.

The fund was launched in 2000 and had $373 billion in assets under management as of late 2023. iShares is the ETF division of massive investment manager BlackRock (BLK -0.78%), which collectively manages almost $10 trillion in global assets.

3. Vanguard SP 500 ETF

3. Vanguard S&P 500 ETF

Like the previous two ETFs, the Vanguard S&P 500 ETF is a simple way to invest in the companies of the S&P 500 Index. It also charges just 0.03% annually. The ETF version of this Vanguard fund has $319 billion in assets under management. The company also offers a mutual fund that tracks the S&P 500.

Vanguard’s founder, Jack Bogle, invented the passive index fund in the 1970s, which helped revolutionize access to investments for everyday retail investors.

4. ProShares Short SP500

4. ProShares Short S&P500

Unlike the previous ETFs, the ProShares Short S&P500 fund is a way to bet against the S&P 500 Index. An investor might want to profit by betting against an investment, as some investors did during the bear market of 2022.

The ProShares Short S&P500 aims to provide a return exactly the inverse of the S&P 500 Index's daily return. So, if the S&P 500 is up 1% on a given day, the ProShares fund will be down 1% (before fees, which total 0.89% on an annualized basis). If the S&P 500 is down 1%, the ProShares fund will be up 1% (before subtracting fees). ProShares can deliver this performance by utilizing derivatives contracts on the S&P 500 Index.

The fund might have a place in the portfolios of investors looking to hedge against what they expect to be a downturn in the market. However, remember that due to the use of derivatives contracts and the compounding effect of returns, the ProShares fund is designed only to reflect daily inverse returns of the S&P 500, not to be a buy-and-hold fund over extended periods. Fund performance will deviate from the exact inverse performance of the S&P 500.

Also, while designed to be a hedge in a bear market, this ETF will decline severely in value during a bull market. Investors should note this particular risk and understand the fund's function as a shorter-term hedge.

5. ProShares Ultra SP500

5. ProShares Ultra S&P500

The ProShares Ultra S&P500 fund is another offering that utilizes derivatives contracts to modify the returns of the S&P 500 Index. In this case, though, the fund seeks to double the return of the S&P 500 on a daily basis. For example, if the S&P 500 is up 1%, the fund seeks to provide a 2% return, less fund fees (0.89% on an annualized basis).

If investors are bullish on the S&P 500, they might utilize leverage to amplify returns -- or to get bigger returns while utilizing less cash. Keep in mind that this can be dangerous, though. If an investment bet doesn't work out, this leverage will amplify losses by just as much (or more) than it would amplify daily gains.

Additionally, ProShares discloses that its fund only seeks double the return of the S&P 500 on a daily basis. Returns will deviate from double the S&P 500 over extended periods. This fund is not designed to be a long-term buy-and-hold strategy.

Drawbacks to investing in SP 500 ETFs

Drawbacks to investing in the S&P 500

Investing in an S&P 500 ETF can lay a great foundation for an investment portfolio. It isn't necessarily the be-all and end-all of investing, though.

For one thing, the S&P 500 is a market cap-weighted index. That means the bigger a company is, the larger its share in the portfolio. For example, as of this writing, the top 10 stocks in the index make up almost 30% of an S&P 500 ETF's holdings. This makes for outsize exposure to just a few companies and means an S&P 500 ETF may not be as diversified as some investors think.

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Investors should also consider their long-term goals. Investing in stocks is one of the best ways to build wealth over time. However, investing solely in the S&P 500 may not be the best strategy for retirees in need of income. Incorporating other asset classes into the mix would be advisable.

On the other hand, younger investors with decades until they plan to tap into their investments may also want to invest outside of the S&P 500. For example, the S&P 500 is a large-cap stock index. That means it yields no exposure to smaller businesses, many of which are fast-growing and could be future leaders of the S&P 500.

Nevertheless, for investors looking for a quick way to get started in their investing journey, an S&P 500 ETF is a fantastic place to start.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Nicholas Rossolillo has positions in Amazon, Apple, and Berkshire Hathaway. The Motley Fool has positions in and recommends Amazon, Apple, Berkshire Hathaway, Microsoft, and Vanguard S&P 500 ETF. The Motley Fool recommends Johnson & Johnson and UnitedHealth Group. The Motley Fool has a disclosure policy.

Best S&P 500 ETFs | The Motley Fool (2024)

FAQs

Best S&P 500 ETFs | The Motley Fool? ›

The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Microsoft, Nvidia, and Vanguard S&P 500 ETF.

What is the best S&P 500 ETF to buy? ›

What's the best S&P 500 ETF?
ETFTickerAnnualized 5-year return
iShares Core S&P 500 ETFIVV14.95%
Vanguard S&P 500 ETFVOO14.89%
SPDR S&P 500 ETF TrustSPY15.01%
Source: VettaFi. Data is current as of market close on July 1, 2024, and is for informational purposes only.
5 days ago

What ETF has outperformed the S&P 500? ›

One fund that has routinely outperformed the S&P 500 index is the Vanguard Information Technology Index Fund ETF (VGT -2.45%). Here's why you should consider adding this ETF to your portfolio.

What are the top 5 ETFs to buy? ›

7 Best ETFs to Buy Now
ETFAssets under managementExpense ratio
iShares 20+ Year Treasury Bond ETF (TLT)$57.5 billion0.15%
iShares Bitcoin Trust ETF (IBIT)$21.7 billion0.12%
iShares Gold Trust (IAU)$30.1 billion0.25%
Vanguard S&P 500 ETF (VOO)$482 billion0.03%
3 more rows
3 days ago

What ETF doubles the S&P 500? ›

The Direxion Daily S&P 500® Bull 2X Shares seeks daily investment results, before fees and expenses, of 200% of the performance of the S&P 500® Index.

Is VOO the best S&P 500 ETF? ›

The S&P 500 simply reflects the market composition. In the long run, the funds' broad diversification, low turnover, and low fees outweigh these risks.” While the two ETFs follow the same strategy, they earn different ratings. VOO earns a top rating of Gold, while SPY earns the next best rating of Silver.

Why Vanguard S&P 500 ETF is highly rated? ›

Overview of the Vanguard S&P 500 ETF

Known for its superior expense ratio, the Vanguard ETF is a favorite among cost-conscious investors. The ETF aims to mirror the performance of the S&P 500 by holding a similar portfolio of stocks.

Does QQQ outperform sp500? ›

NASDAQ: QQQ

This ETF has been a huge winner over the past decade, producing an annual average return of 18.1%. That easily outpaces the performance of the Vanguard S&P 500 Growth ETF and the S&P 500 index. Invesco boasts that the ETF has outperformed the S&P 500 index 87% of the time over the past decade.

Does Vanguard outperform the S&P 500? ›

Investors looking for ETFs that have beaten both the S&P 500 and the Nasdaq Composite over the last year have come to the right place. Here's a closer look at the Vanguard Growth ETF (VUG -2.12%), Vanguard Mega Cap Growth ETF (MGK -2.04%), and the Vanguard Communications Services ETF (VOX -2.12%).

Is VOO still a good investment? ›

VOO has a consensus rating of Moderate Buy which is based on 401 buy ratings, 97 hold ratings and 8 sell ratings. What is VOO's price target? The average price target for VOO is $585.86.

Which ETF gives the highest return? ›

List of 15 Best ETFs in India
  • Kotak Nifty PSU Bank ETF. 205.5%
  • Nippon India ETF PSU Bank BeES. 200.8%
  • BHARAT 22 ETF. 191.7%
  • ICICI Prudential Nifty Midcap 150 Etf. 106.6%
  • Mirae Asset NYSE FANG+ ETF. 80.6%
  • HDFC Nifty50 Value 20 ETF. 72.4%
  • UTI S&P BSE Sensex ETF. 59.0%
  • Nippon India ETF Nifty 50 BeES. 57.9%
Jul 29, 2024

What is the number one traded ETF? ›

Most Popular ETFs: Top 100 ETFs By Trading Volume
SymbolNameAvg Daily Share Volume (3mo)
FXIiShares China Large-Cap ETF34,804,004
SPXSDirexion Daily S&P 500 Bear 3X Shares34,495,914
HYGiShares iBoxx $ High Yield Corporate Bond ETF33,491,598
QQQInvesco QQQ Trust Series I33,429,305
96 more rows

Which ETF has the best 10 year return? ›

Best ETFs 10 Years (Leveraged)
SymbolETF Name10y Chg 8-2-24
ROMProShares Technology 2x ETF1213%
QLDProShares QQQ 2x ETF1067%
UPROProShares S&P 500 3x ETF657%
SPXLDirexion S&P 500 3x ETF656%
17 more rows

Who has the best S&P 500 ETF? ›

Our recommendation for the best S&P 500 ETF is the iShares Core S&P 500 ETF due to its ultralow fees, minimal tracking error, strong trading volume and robust assets under management. IVV offers the best value proposition if you're a long-term buy-and-hold investor who isn't looking to trade daily or utilize options.

What is difference between S&P 500 and S&P 500 ETF? ›

The SPDR S&P 500 ETF Trust (SPY), also known as SPY, is an exchange-traded fund that tracks the performance of the S&P 500 index. The S&P 500 is a stock market index that measures the performance of 500 large cap publicly traded companies in the United States.

What is the best way to invest in the S&P 500? ›

The easiest and most efficient way to invest in the S&P 500 is via a low-cost exchange-traded fund (ETF). Several ETFs track the S&P 500, but the oldest and most popular is the SPDR S&P 500 ETF Trust (SPY). SPY was the first ETF to hit the US market in January 1993 and is now the world's most heavily traded ETF.

What is better S&P 500 Index Fund or ETF? ›

The Bottom Line. Both index mutual funds and ETFs can provide investors with broad, diversified exposure to the stock market, making them good long-term investments suitable for most investors. ETFs may be more accessible and easier to trade for retail investors because they trade like shares of stock on exchanges.

Which is better, Splg or VOO? ›

VOO is more expensive with a Total Expense Ratio (TER) of 0.03%, versus 0.02% for SPLG. VOO is up 18.7% year-to-date (YTD) with +$48.81B in YTD flows. SPLG performs worse with 18.69% YTD performance, and +$10.47B in YTD flows.

Which is better, IVV or VOO? ›

In the past year, IVV returned a total of 20.18%, which is slightly lower than VOO's 20.22% return. Over the past 10 years, IVV has had annualized average returns of 12.68% , compared to 12.69% for VOO. These numbers are adjusted for stock splits and include dividends.

What is VTI vs VOO? ›

VTI is a wider-scoped ETF that tracks the total U.S. stock market as indexed by the CRSP US Total Market Index. It includes small-cap, mid-cap, and large-cap stocks. VOO tracks the most widely-watched U.S. stock market index: Standard & Poor's 500 (S&P 500). The S&P 500 contains just over 500 large-cap stocks.

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