How to Invest in the S&P 500 Index & Buy SP 500 Stock

While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. If you don’t want an index fund or ETF, you can hand-select individual stocks of companies you want to invest in. Keep in mind that investing in a single company increases the risk and volatility of your investment, and will require thoughtful research and stock performance analysis.

Investments in Bitcoin ETFs may not be appropriate for all investors and should only be utilized by those who understand and accept those risks. Investors seeking direct exposure to the price of bitcoin should consider a different investment. For this reason, the total stock market index is often seen as a more representative measure of the stock market than the S&P 500. For most people, ETFs will be a more attractive way to get started investing in the S&P 500. It’s up to you to decide which is a better fit for your portfolio.

How to invest in the S&P 500: index funds vs. ETFs

Investment managers are paid a lot of money to generate returns for their portfolios that beat the S&P 500, yet on average, most don’t. S&P 500 index funds may differ slightly in the exact makeup of their portfolios. The Vanguard S&P 500 Growth ETF, for example, emphasizes the growth-oriented companies in the S&P 500 .

For years interest rates on savings accounts and CDs haven’t been high enough to keep up with rising prices. Moreover, if you’re concerned about the heavy weighting of certain sectors in the S&P index you can invest instead in an equal weight S&P 500 index fund or add those shares to your portfolio. https://day-trading.info/ Although the S&P 500 is the most popular large-cap U.S. stock index, it has been running into tough competition from U.S. total market indexes, which also include midcap and small-cap stocks. The offers that appear in this table are from partnerships from which Investopedia receives compensation.

Home Construction ETF on March 10 saw $179 million of inflows, its largest daily inflow since October 2021, according to FactSet data. Small inflows followed this week before investors pulled $27 million from the fund on Wednesday, FactSet data show. If history repeats for the S&P 500 in 2023, expect investors to take advantage of the discount on Tesla stock to buy in for the long term. The economic turmoil isn’t affecting the company’s long-term goals, either.

Pros and Cons of Investing in the S&P 500

Providing or obtaining an estimated insurance quote through us does not guarantee you can get the insurance. Acceptance by insurance companies is based on things like occupation, health and lifestyle. By providing you with the ability to apply for a credit card or loan, we are not guaranteeing that your application will be approved. Your application for credit products is subject to the Provider’s terms and conditions as well as their application and lending criteria. Finder.com.au has access to track details from the product issuers listed on our sites.

• If the stock market is a giant jigsaw puzzle, you can think of an index as a magnifying glass.
• Alternatively, you can buy an S&P 500 value fund, which represents stocks that are considered undervalued or an S&P 500 growth fund, which represents the fastest-growing companies in the S&P 500.
• Some track the whole index, while others focus on niches, such as companies that pay high dividends, or ones occupying a particular sector, such as financials.
• Please consult a qualified professional for this type of service.
• Other large sectors in the S&P 500 are financials (11%) and communication services (8.1%).

Consequently, they are highly liquid and subject to intraday price fluctuations. Index mutual funds and ETFs maintain a strategy of passive index replication, affording investors broad access to all of the securities within the given index. Are passively managed mutual funds that have slightly higher buy-in rates compared to ETFs. Similarly to index funds, ETFs often have expense ratios, so make sure you see how much you’d be paying in fees to invest in a given ETF. S&P 500 is a stock market index made up of shares of 500 large, industry-leading U.S. companies.

Stocks Mentioned

To the best of our knowledge, all content is accurate as of the date posted, though offers contained herein may no longer be available. The opinions expressed are the author’s alone and have not been provided, approved, or otherwise endorsed by ourpartners. Investors in US companies have enjoyed some best blue chip stocks to buy in 2021 stellar returns over the last five years, thanks to the soaring price of technology stocks such as Apple and Microsoft. At Bankrate we strive to help you make smarter financial decisions. While we adhere to stricteditorial integrity, this post may contain references to products from our partners.

The best way to invest in the S&P 500 is to buy exchange-traded funds or index funds that track the index. There are differences between these two approaches that we’ll examine below, but in either case, these funds offer extremely low costs and superior diversification. Please note that the information published on our site should not be construed as personal advice and does not consider your personal needs and circumstances. While our site will provide you with factual information and general advice to help you make better decisions, it isn’t a substitute for professional advice.

A key price report showed progress in the battle on inflation, leaving room for the Fed to hike interest rates by just a quarter point — or nothing at all — at its policy meeting next week. We’ve tested, analysed and scored trading apps to find the 10 best trading platforms in the UK, who they’re best for and the pros and cons. Get up to £1,000 cashback when you transfer your account over to Bestinvest.

Fidelity 500 Index Fund (FXAIX)

Regardless of which option you choose , you’re likely to see some consistent returns. Make sure you have the right brokerage account for your needs so you’ll save on fees and commissions. Legendary investor Warren Buffett has some sage advice for wannabe stock pickers.

The argument for buying a basket of individual stocks is that you can “beat the market” and increase your return. If you can do this over a number of years, you’ll obviously beat the average and increase your returns. You can choose between investing in individual shares of the 500 companies or you can invest in the entire market through an index fund. Once you’ve purchased the stocks, it’s important to keep an eye on the business’s performance. While this doesn’t necessarily mean the company’s share price , you will need to actively monitor how the business is performing compared with your expectations.

Instead of purchasing a single stock, funds give you exposure to all the different shares it contains, providing instant diversification for your portfolio. Single-stock ETFs are a new exchange-traded product that allows for leveraged or inverse trading of single stocks. Taking a different 20-year span that also included three bull markets but only one bear market, the outcome is quite different. The total return of $10,000 invested in January 1987 would have been $84,227.27. Despite these unprecedented events, the S&P 500 still managed to generate a total annual return of 8.06% with reinvested dividends. The total return over this period was 409.13%, which means that a $10,000 investment made at the beginning of 2001 would have been $50,913.05 by the end of 2021.

Supporting documentation for any claims, if applicable, will be furnished upon request. Investing in an S&P 500 ETF or fund is a single-ticket solution to get exposure to many of the world’s most dynamic companies in the largest economy. It eliminates having to spend countless hours analyzing and picking stocks. And the index is a consistent performer over the long term. In the 10 years ended Oct. 4, 2022, the S&P 500 generated an annualized return of 10%. We recommend the best products through anindependent review process, and advertisers do not influence our picks.

This may impact how, where, and in what order products appear. Opinions expressed on this site are the author’s alone, not those of a third-party entity, and have not been reviewed, approved, or otherwise endorsed. This mutual fund is almost identical to the overall S&P 500 value, and it’s actively managed with a relatively high expense ratio. Larger companies are generally more stable to invest in because they are well-established and widely followed. Thus, these stocks usually have less risk and lower volatility. The S&P 500 combines large companies across various industries, so investors access a broad, diversified mix of companies when investing in it.

However, how you gain exposure to the market varies depending on your style. If you’re looking to beat the market, you can’t take a basket approach because getting the market average makes it impossible to outperform. In this instance, a more actively managed approach will be required. The argument for index investing is the returns are quite strong. If you take the S&P 500’s return since it was introduced in 1957, you’d get an annualised return of 10.7%. In other words you’d double your money in less than 7 years.

One of the most important is the sustainability of the company’s dividend. Pioneer and Devon, in particular, could experience volatility with their dividend payouts because of the variable component. For example, Devon’s total dividend has fallen two quarters in a row as a result of lower free cash flow. Investors shouldn’t just look at the high dividend yields of these stocks. Pioneer Natural Resources is a Dallas-based major independent oil and gas producer based.

She holds a Bachelor of Science in Finance degree from Bridgewater State University and helps develop content strategies for financial brands. Millions of Americans invest in the S&P 500 over decades and end up getting fantastic returns. Again, doing this with a little assistance from a financial or robo-advisor isn’t a bad idea if you don’t have a lot of experience already. Lots of discount brokerage firms or trading platforms will let you trade any ETF assets for free. The advice you will get won’t be nearly as detailed or in-depth, but these bots can still be of assistance if you don’t have investing experience to rely on. Technically, 505 stocks are represented in the index at this time – a little more than the 500 in the name.

Over its history though, while some years have been better than others, the S&P 500 index’s average annual return has been almost 10%. Both the Nasdaq 100 and Nasdaq Composite are market-cap weighted like the S&P 500. However, the Nasdaq 100 doesn’t include any financial companies.

The company earned $8.59 per share in 2022, so its stock trades at a P/E ratio of 21. That’s still 16% cheaper than the Nasdaq-100, even after Meta’s stock price doubled from its recent low point. If the broader market stages a recovery this year — as history suggests is likely — look for Meta Platforms stock to head higher.