The S&P 500 (Standard and Poor's 500) is a market-cap-weighted index of 500 of the largest U.S. publicly traded companies. It includes companies like Apple, Microsoft, Amazon, Nvidia, and JPMorgan Chase. It is the benchmark for U.S. large-cap equity performance and the most commonly recommended investment for long-term investors. You cannot invest directly in the index but can invest in funds that track it.

Should I invest in VOO or SPY?

Both track the S&P 500 very closely. VOO (Vanguard, 0.03% expense ratio) and IVV (iShares, 0.03%) are the lowest-cost options. SPY (State Street, 0.09%) is older and more liquid, important for institutional traders and options but not for individual buy-and-hold investors. For long-term investors, VOO or IVV are the better choices due to lower fees. The cost difference on $100,000 is $60 per year.

Is now a good time to invest in the S&P 500?

Time in the market beats timing the market. Even with elevated valuations in 2025, regular investing in S&P 500 index funds is appropriate for money with a 10 or more year horizon. For lump sums, consider spreading over 6 to 12 months via DCA to reduce timing risk. Do not try to wait for a better entry point. The evidence consistently shows that attempting to time entry produces worse outcomes than investing immediately.

What are the risks of investing only in the S&P 500?

Concentration in U.S. large-cap stocks: no international exposure, no small-cap, no bonds. The S&P 500 has had extended bear markets: -49% in 2000 to 2002, -56% in 2007 to 2009, -34% in 2020. For young investors with long horizons, S&P 500 concentration is reasonable. For those near retirement or with shorter horizons, adding international stocks and bonds reduces concentration risk.

What is the S&P 500 dividend yield?

The S&P 500 dividend yield is approximately 1.3% to 1.5% in 2025, lower than the historical average of 2% to 3%. Reinvesting dividends automatically in most index funds adds this yield to total return as additional shares. On $100,000, 1.5% dividends equal $1,500 per year reinvested. Over 30 years of reinvestment, dividend compounding contributes meaningfully to total return even at current low yields.

How to Invest in the S&P 500 in 2025: A Practical Guide

The S&P 500 tracks the 500 largest U.S. publicly traded companies by market capitalization. With a long-run average total return of approximately 10.2% annually including dividends, it has been the most powerful wealth-building investment accessible to ordinary investors for generations. In 2025, you can invest in S&P 500 index funds with virtually zero cost, zero minimum investment, and zero ongoing management. This guide covers exactly how to invest in it, which specific funds to choose, what the 2025 context means for return expectations, and how to use the investment calculator with S&P 500 return assumptions.

The Best S&P 500 Index Funds in 2025

Top S&P 500 index funds and ETFs in 2025 — expense ratios and minimums

Fund	Provider	Expense Ratio	Account Type	Min Investment	Type
FXAIX	Fidelity	0.015%	Any Fidelity account	$0	Mutual fund
FZROX	Fidelity	0.000%	Fidelity account only	$0	Zero-fee total market fund
VFIAX	Vanguard	0.04%	Vanguard account	$3,000	Mutual fund
VOO	Vanguard ETF	0.03%	Any brokerage	$1 fractional	ETF
IVV	iShares ETF	0.03%	Any brokerage	$1 fractional	ETF
SPY	State Street ETF	0.09%	Any brokerage	$1 fractional	ETF
SWPPX	Schwab	0.02%	Schwab account	$0	Mutual fund

How to Open an Account and Start Investing

Open a Roth IRA at Fidelity (free, 10 minutes): best first account for most investors under $150,000 income
Link your bank account using routing and account numbers
Transfer an initial investment amount (minimum $0 at Fidelity and Schwab)
Search for FXAIX (Fidelity S&P 500 index fund) within the account
Place a purchase order for any dollar amount using fractional share investing
Set up automatic monthly investments for your target contribution amount
Enable dividend reinvestment to maximize compounding

📈$500/Month in S&P 500 for 30 Years

At the S&P 500 nominal historical return of 10%: $500/month for 30 years grows to $1,130,000. At a more conservative 7% reflecting current valuations: $612,000. At the real (after inflation) return of approximately 7% historical: $612,000 in nominal dollars, roughly $355,000 in today's purchasing power. Even the conservative projection shows more than $600,000 built from $180,000 in total contributions.

2025 S&P 500 Context: What to Expect

The S&P 500 enters 2025 with elevated valuations (P/E ratio approximately 22 to 25 versus historical average 15 to 16). The Shiller CAPE of 35 to 37 historically suggests 10-year forward returns of 4% to 7% versus the 10% long-run average. For the investment calculator: use 7% as a conservative base for a 20 to 30-year projection, not the 10% historical average. This accounts for the probability of mean reversion in valuations over the next decade.

S&P 500 vs. Total Market: Which Is Better?

The S&P 500 covers 500 large-cap U.S. stocks representing approximately 80% of U.S. market capitalization. The total market index covers all 4,000+ publicly traded U.S. companies, adding small and mid-cap exposure. Historically, small-cap stocks have provided a return premium over large-cap stocks (the small-cap factor), but this premium has been inconsistent in recent decades. For most investors, either S&P 500 or total market works well. The total market's broader diversification is a slight advantage at no additional cost.

VOO vs. SPY vs. IVV: Which ETF to Choose

S&P 500 ETF comparison: annual fee on $100,000 and when to choose each

ETF	Expense Ratio	Annual Fee on $100K	Difference vs. SPY	Choose If
VOO (Vanguard)	0.03%	$30/yr	Save $60/yr vs SPY	You prefer Vanguard or want lowest cost ETF
IVV (iShares)	0.03%	$30/yr	Save $60/yr vs SPY	You use a non-Vanguard brokerage
SPY (State Street)	0.09%	$90/yr	Baseline	Need maximum liquidity for trading (not needed for buy-and-hold)
FXAIX (Fidelity)	0.015%	$15/yr	Save $75/yr vs SPY	You use Fidelity; slight lowest-cost advantage

Project Your S&P 500 Investment Growth

Enter your contribution and use 7% to 10% to see the range of 30-year outcomes.

Open Investment Calculator →

How to Invest in the S&P 500 in 2025: A Practical Guide

The Best S&P 500 Index Funds in 2025

How to Open an Account and Start Investing

2025 S&P 500 Context: What to Expect

S&P 500 vs. Total Market: Which Is Better?

VOO vs. SPY vs. IVV: Which ETF to Choose

Frequently Asked Questions

Frequently Asked Questions

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