The complete guide — which funds to buy, how much you need, what the fees actually cost you, and a step-by-step account setup walkthrough. No fluff, no affiliate padding.
The S&P 500 is the closest thing investing has to a "set it and forget it" system. It's not exciting. It's not a hot tip. It's the foundational layer of wealth-building that most financial advisors quietly keep for themselves.
Here's what NerdWallet won't tell you: most people asking "how do I invest in the S&P 500" don't need more education about what it is — they need someone to tell them exactly which account to open, which fund to buy, and what to type. That's what this guide does.
The S&P 500 is a stock market index that tracks the 500 largest publicly traded U.S. companies — Apple, Microsoft, Amazon, Nvidia, and 496 others. Together, these companies represent about 80% of the total value of the U.S. stock market.
Here's the key: you can't directly buy the S&P 500 — it's an index, not a product. What you buy is a fund that tracks the index. When Apple rises, your fund rises. When the market drops, so does your fund. You get the average performance of 500 companies in a single purchase.
Over the last century, the S&P 500 has returned approximately 10% per year on average, before inflation (roughly 7% after inflation). No professionally managed fund has consistently beaten this over the long term. This is why legendary investors — including Warren Buffett — publicly recommend index funds for most people over active stock picking.
The 500 companies are selected by a committee at S&P Dow Jones Indices. Contrary to popular belief, it's not purely the 500 biggest companies — they must also be US-based, publicly traded, financially viable, and meet liquidity requirements. The index is market-cap weighted, meaning larger companies like Apple and Microsoft make up a proportionally larger slice of your investment than smaller ones.
The top 10 holdings currently represent roughly 35% of the entire index — so when you hear "the S&P 500 went up 1%," it's partly driven by a handful of mega-cap tech companies. This concentration is worth understanding, and it's one reason some investors pair S&P 500 holdings with small-cap or international index funds.
It's 500 large US companies. Missing: mid-cap stocks, small-cap stocks, international markets, bonds. Most long-term investors treat the S&P 500 as the core of a portfolio, not the entirety of it.
This is the part most guides skip. Here are the exact steps — from zero to your first investment — with no assumed knowledge.
Before you pick a broker, decide why you're investing. This determines the account type, which affects your tax treatment significantly.
Taxable brokerage account — No contribution limits, no restrictions on withdrawals. Pay capital gains tax when you sell. Best for money you may need before retirement.
Roth IRA — Contribute after-tax dollars, gains grow tax-free, withdrawals in retirement are tax-free. 2026 limit: $7,000/year ($8,000 if 50+). Best for most young investors.
Traditional IRA / 401(k) — Contribute pre-tax dollars, pay taxes on withdrawal. Best if your employer offers 401(k) matching (always capture the full match first).
For S&P 500 index investing, the brokerage matters less than the fund you choose. All major brokerages offer commission-free S&P 500 ETFs. The biggest differences are account minimums, fractional share availability, and UX.
Fidelity — Best all-around for beginners. $0 minimum. Fractional shares available. Offers FZROX (zero expense ratio total market fund) as an alternative.
Charles Schwab — Strong for ETF investors. $0 minimum. Fractional shares on select ETFs. SCHB is their low-cost total market option.
Vanguard — The original index fund company. Slightly less polished app, but unmatched credibility. Home of VFIAX and VOO.
Robinhood / SoFi — Accessible and easy, but less educational content. Fine for ETF investing; less ideal if you'll want to diversify into other instruments later.
Opening a brokerage account takes 10–15 minutes. You'll need: government ID, Social Security number, bank account details (routing + account number). Most brokerages verify your bank and enable transfers within 1–3 business days.
Your first deposit doesn't have to be large. Most major brokerages have no minimums for ETFs. You can start with $50, $100, or $1 if your broker offers fractional shares.
Search the ticker symbol in your brokerage's search bar. For most people starting out, VOO (if at Vanguard/Schwab/elsewhere) or FXAIX (if using Fidelity) are the default best choices based purely on cost and reputation.
ETFs (like VOO, IVV, SPY) trade like stocks — you buy shares during market hours. Index funds (like FXAIX, SWPPX) are bought at end-of-day price. For most long-term investors, this distinction doesn't meaningfully matter.
For ETFs: search the ticker → click Buy → choose dollar amount (fractional) or number of shares → market order for immediate purchase. For index funds: search the fund name → buy at the price that sets at end of trading day.
After your first purchase: set up automatic monthly investments if your brokerage supports it. This is more important than the amount. $200/month automated beats $2,000 once a year and then forgetting.
This is the hardest step. The S&P 500 drops 10–20% in a given year with regularity. The investors who build wealth are the ones who don't sell during those drops. Every historical dip has been followed by recovery and new highs — but only for those who stayed in.
Check your portfolio quarterly at most. Annual rebalancing is enough for most investors. Checking daily increases the chance you'll make an emotional decision that costs you compounding gains you can never get back.
For most index investors in 2026, the answer is: almost nothing. Here's the complete breakdown.
An expense ratio is an annual fee charged by the fund, expressed as a percentage of your investment. On a $10,000 investment in VOO (0.03% expense ratio), you pay $3 per year. That's it. No other ongoing fee.
| Investment | Expense Ratio | Annual Cost on $10K | Annual Cost on $100K |
|---|---|---|---|
| VOO (Vanguard S&P 500 ETF) | 0.03% | $3 | $30 |
| IVV (iShares Core S&P 500 ETF) | 0.03% | $3 | $30 |
| FXAIX (Fidelity 500 Index Fund) | 0.015% | $1.50 | $15 |
| SPY (SPDR S&P 500 ETF) | 0.0945% | $9.45 | $94.50 |
| Average actively managed fund | ~0.50% | $50 | $500 |
The difference between 0.03% and 0.50% sounds small. On a $100,000 portfolio over 30 years at 10% annual returns, the lower-fee fund produces approximately $47,000 more in final value. Fees compound just like returns do — only in the opposite direction.
At all major US brokerages (Fidelity, Schwab, Vanguard, Robinhood, E*TRADE, TD Ameritrade), S&P 500 ETF purchases are commission-free. This wasn't always the case — brokerages charged $5–$10 per trade until 2019. Today there is no per-trade cost at any major platform.
Index funds are tax-efficient — their low turnover generates fewer taxable events than actively managed funds. In a Roth IRA, your gains are completely tax-free. In a taxable account, you'll pay long-term capital gains tax when you sell, which is 0%, 15%, or 20% depending on your income.
Both track the S&P 500. Both are extraordinarily low-cost. The differences are mostly mechanical — here's what actually matters for your decision.
For a buy-and-hold S&P 500 investor with a 10+ year horizon, the practical difference between VOO (ETF) and FXAIX (index fund) is negligible. Both track the same index, both are near-zero cost, both will produce nearly identical long-term returns. Pick the one your brokerage makes easiest to automate and stop there.
These are the funds worth considering. We've excluded SPY from our top picks despite its popularity — its expense ratio (0.0945%) is 3x higher than VOO and IVV for functionally identical exposure. SPY exists mainly for institutional traders who need the liquidity; retail long-term investors have no reason to pay the premium.
| Fund | Type | Expense Ratio | Min. Investment | Brokerage | Beelinger Take |
|---|---|---|---|---|---|
VOO Top Pick Vanguard S&P 500 ETF | ETF | 0.03% | ~$1 fractional | Any major broker | Best default choice. Vanguard's reputation + near-zero cost + universal availability. |
FXAIX Top Pick Fidelity 500 Index Fund | Index Fund | 0.015% | $1 | Fidelity only | Lowest expense ratio of any S&P 500 fund. If you use Fidelity, this is the default answer. |
IVV iShares Core S&P 500 ETF | ETF | 0.03% | ~$1 fractional | Any major broker | VOO's functional twin. Same cost, same index. Choose whichever your broker makes easier. |
SWPPX Schwab S&P 500 Index Fund | Index Fund | 0.02% | $1 | Schwab only | Best option for Schwab users. Near-zero cost, auto-invest friendly. |
VFIAX Vanguard 500 Index Fund Admiral Shares | Index Fund | 0.04% | $3,000 | Vanguard only | Great fund — but the $3,000 minimum and Vanguard-only availability makes VOO better for most people. |
SPY SPDR S&P 500 ETF Trust | ETF | 0.0945% | ~$1 fractional | Any major broker | The most traded ETF in the world — but 3x the cost of VOO/IVV for the same exposure. Only makes sense for short-term traders needing maximum liquidity. |
This is the number that changes how people think about starting. Use the calculator below — then scroll down for the historical context that makes it real.
The calculator uses assumptions. Here's what has actually happened to $10,000 invested in the S&P 500 at different points in history, with dividends reinvested and no additional contributions:
| Invested In | Initial Amount | Value by End of 2025 | Total Gain | Annualized Return |
|---|---|---|---|---|
| January 2000 | $10,000 | $67,400 | +574% | ~8.1%/yr |
| January 2005 | $10,000 | $63,200 | +532% | ~10.1%/yr |
| January 2010 | $10,000 | $72,800 | +628% | ~14.5%/yr |
| January 2015 | $10,000 | $27,500 | +175% | ~10.6%/yr |
| January 2020 (pre-COVID) | $10,000 | $21,200 | +112% | ~13.5%/yr |
Even investing at the absolute peak of the dot-com bubble in January 2000 — right before a catastrophic crash — still produced a 574% total return over 25 years. The S&P 500 has never produced a negative return over any 20-year period in its history. Time is the variable that matters most.
S&P 500 index investing is not appropriate for everyone in every situation. Here's the honest breakdown.
S&P 500 index investing is one of the three pillars of a financial freedom strategy, alongside building active income streams and creating passive income assets. It's not the fast lane — it's the stable foundation. A portfolio that generates income (real estate, digital products, businesses) plus long-term S&P 500 growth is more resilient than either alone.
Learn how to layer passive income streams on top of your S&P 500 foundation — creating cash flow now while the index grows in the background.