The Standard & Poor's 500 Index (S&P 500) is an index of 500 of the largest U.S. companies, listed on the New York Stock Exchange or NASDAQ, selected by the Standard & Poor's Index Committee based on market capitalization. The S&P 500 Index is a widely recognized barometer of the U.S. equity market. S&P 500 Index funds allow investors to establish a core allocation in large-cap U.S. equities, which have been advised by one of the most iconic American investors, Warren Buffet, also known as the Oracle of Omaha. S&P 500 Index funds seek to replicate the performance of the benchmark index by investing in S&P 500 constituents with similar weights. These funds employ a passive or indexing investment strategy and invest all or a substantial amount of their total net assets in common stocks included in the benchmark index. All fund data below is as of Jan. 15, 2019, according to Morningstar.
Vanguard 500 Index Fund Investor Shares
The Vanguard 500 Index Fund Investor Shares seeks to provide investment results corresponding to the price and yield performance of the S&P 500 Index, its benchmark index, with a high degree of positive correlation. VFINX was issued by Vanguard on Aug. 31, 1976. The fund has generated a 13.71% total return over a three-year period thru Jan. 15, 2019. VFINX is managed by the Vanguard Equity Investment Group and charges an annual expense ratio of 0.14%, which is significantly lower than the average expense ratio of mutual funds with similar holdings.
To achieve its investment objective, VFINX implements an indexing strategy and invests nearly all of its total assets in stocks included in the S&P 500 Index, with approximately the same proportions as the weightings in the index.
The fund has a Sharpe ratio of 0.75; and standard deviation in line with that of the underlying benchmark at of 10.96%.
Like most S&P 500 Index funds, VFINX is best suited for long-term investors with a moderate to high degree of risk tolerance seeking exposure to the U.S. large-cap equities market. Since VFINX has a minuscule tracking error and a low expense ratio, it is an attractive core holding for an equity portfolio.
Schwab S&P 500 Index Fund
The Schwab S&P 500 Index Fund was issued on May 19, 1997, by The Charles Schwab Corporation. SWPPX is advised and managed by Charles Schwab Investment Management, Inc., and charges an expense ratio of 0.02%.
SWPPX is a mutual fund that seeks to provide investment results corresponding to the total return of the S&P 500 Index. To achieve its investment goal, SWPPX typically invests at least 80% of its total net assets in stocks comprising the S&P 500 Index. Additionally, SWPPX generally gives the same weights to these stocks as the index.
As of Jan. 16, 2010, SWPPX has 505 holdings, which amount to $32.13 billion, and a portfolio turnover of 2%. SWPPX had a beta of 1.0; an alpha of -0.07; a Sharpe ratio of 0.76; and standard deviation of 10.95.
Fidelity 500 Index Fund
Issued on Feb. 17, 1988, by Fidelity, the Fidelity 500 Index Fund provides low-cost exposure to the U.S. large-cap equities market. FXAIX charges an annual net expense ratio of 0.02%.
Since its inception, the fund has generated, 9.25% in annual average returns and interestingly, before fees and expenses, FXAIX has a perfectly positive correlation to the S&P 500 Index. To track the underlying index, FXAIX invests at least 80%, under normal market conditions, of its total net assets in common stocks comprising the index. FXAIX has historically tracked the index with a small degree of tracking error.
FXAIX serves as an alternative to VFINX and SWPPX, and is one of the top funds that offers exposure to a basket of common stocks included in the S&P 500 Index. FXAIX may serve as a core holding in a portfolio of U.S. equities.
T. Rowe Price Equity Index 500 Fund
The T. Rowe Price Equity Index 500 Fund (PREIX) was launched on March 30, 1990, and has since delivered an average annual return of 9.5%. The PREIX charges a net expense ratio of 0.21%. Tracking the S&P 500, the fund aims to match the investment return of large-capitalization U.S. stocks by seeking to match the performance of its benchmark index
As of Jan. 15, 2019, the PREIX has total net assets of $153.4 billion. It may be best suited for investors seeking to gain exposure to U.S. large-cap equities market.
Investing in Index Funds
Investing in Index Funds can be a great durable investment and also a great way to easily diversify a portfolio. While the stock market has its highs and lows, the long-term trend for the S&P 500 index is overwhelmingly positive. This gives an opportunity for a low-risk investment opportunity.
To invest in an index like one of the four mentioned above, you will need to create an investment account through one of the many brokerages. With such a variety of features and pricing among these brokers, it can be hard to choose one. For this reason, Investopedia has created a list of the best online brokers.