How to Invest in the S&P 500: ETFs, Index Funds, and Futures

There is no share of the S&P 500 to buy. The index is a calculation, and every route into it, ETF, index fund, or futures contract, is indirect: something built to move with the number rather than the number itself. Even the name is rounded off. As of May 2025 the list held 503 stocks, because a handful of companies keep more than one share class on it.

What the Index Measures, and Why There's No Share to Buy

The Standard & Poor's 500 tracks the share prices of 500 of the largest U.S. companies by value and reduces their combined performance to a single number. Those companies represent roughly 80% of the entire U.S. stock market, and S&P Global estimates the index tracks assets with a total market capitalization of about $49.5 trillion as of April 2025.

The index launched in 1957. Since 2012 it has been managed jointly by S&P Global, the CME Group, and News Corp. The headline count stays close to 500 even when the actual stock count drifts a little above it.

ETFs That Track the Index Trade Like Stocks

An S&P 500 exchange-traded fund holds shares of the companies on the index so its performance mirrors the benchmark. Two of the most widely available are the SPDR S&P 500 ETF (SPY) and the iShares Core S&P 500 ETF (IVV); the Vanguard S&P 500 ETF (VOO) is another commonly listed option. In most brokerages and investing apps, you find them by searching the name or ticker and placing an order.

Two features explain the popularity. ETFs are listed on exchanges, so they can be bought and sold any time the market is open. They also tend to carry low management costs, because the manager only has to adjust holdings occasionally to keep the fund lined up with the index instead of running an active stock-picking strategy.

Index Funds Price Once a Day, After the Close

With an index fund, contributions from a large pool of investors go into one pot, and the manager spends it on the stocks that make up whatever benchmark the fund is built around. The bookkeeping is largely software-driven, so when the benchmark's membership changes, the fund's holdings follow.

Buying one works much like buying an ETF. You look up a fund such as the Vanguard 500 Index Fund Admiral Shares (VFIAX) or the Schwab S&P 500 Index Fund (SWPPX) in your account and place an order. The difference is timing. Index funds trade once a day, after the market closes.

Say you enter an order for an index fund late in the morning while prices are still moving. The price on screen at that moment isn't what you get; the order is filled at the fund's price once the trading day ends. An ETF order executes at the market price when it fills, which is why traders who care about the exact entry price gravitate toward ETFs.

Fractional Shares and the Minimum Buy-In

There's no single minimum for S&P 500 ETFs; it varies from fund to fund, and historically the floor was simply the price of one share. That price can be substantial: SPY traded at about $590 per share as of May 29, 2025.

Many brokers and apps now support fractional shares, which lets you buy a slice instead of a whole share. On some platforms that means starting with as little as $1, or even less. The tradeoff is platform-specific. Not every broker offers fractional trading, and the funds available in fractions vary.

The Brokerage Account, and What a Robo-Advisor Decides for You

Before any of this, the investment needs somewhere to sit: an account with an online broker or an investing app. Fees at the low-cost end of the market are modest, and some platforms charge no trading commission at all, which keeps the cost of small, regular purchases down.

Robo-advisors are the hands-off alternative. Money goes in and software manages the allocation. The catch is control. A robo-advisor's portfolio will likely include large-cap U.S. stocks, and therefore many of the biggest 500 companies, but you generally can't specify which funds it buys.

Ten Companies Account for More Than 30% of the Index

An S&P 500 fund is often described as broad exposure, and it is, though not evenly. The 10 largest stocks make up more than 30% of the index, so their movements pull the whole benchmark with them. Market values below are as of May 29, 2025.

Alphabet appears twice because Class A shares carry voting rights and Class C shares do not. That's the multiple-share-class effect that pushes the stock count past 500. Several of these businesses also earn their money differently than their consumer brands suggest: Microsoft draws the bulk of its revenue from Office plus server and cloud services, and Amazon makes most of its money from Amazon Web Services rather than retail. Berkshire Hathaway, run by Warren Buffett, wholly owns companies including Duracell, Geico, and Kraft Heinz.

What Expense Ratios Have Done Since 2015

Fund fees compound quietly against returns. The trend has been downward: between 2015 and 2023, the average expense ratio for index ETFs fell from 0.25 to 0.15, while the average for actively managed ETFs fell from 0.82 to 0.43.

Fees above 1% still show up on funds run by human managers rather than automated tracking, and at that level the drag on long-term returns is significant. Comparing two funds that otherwise track the same 500 companies means reading the stated costs and checking for charges beyond the headline expense ratio.

Futures Contracts Are Speculative and Aimed at Experienced Traders

Take on a futures contract and you have committed to buying an asset on a stated date at a price fixed today. Where that price sits by the delivery date is unknown when the commitment is made, and betting on that gap is the point of the trade. Contracts tied to the S&P 500 exist, and some, the E-mini S&P 500 among them, trade on exchanges, so buying one can be as procedurally simple as looking up the name and placing an order.

The mechanics are the easy part. Futures generally call for advanced experience, which is why they're used mostly by seasoned individual investors and fund managers rather than beginners.

Your Holding Period Sets the Capital Gains Rate

Selling an investment at a profit can create a capital gains tax bill. Investments held for less than one year are often taxed at the short-term capital gains rate, which is less favorable than the long-term rate that applies to investments held longer than a year. Certain accounts change the picture entirely. Gains inside a Roth IRA, for instance, avoid that situation.

One S&P 500 Fund Is Not a Diversified Portfolio

Holding more than one fund spreads risk across more than one basket. Bond, international, commodity, and real estate ETFs cover ground the S&P 500 doesn't, and mixing asset types is the standard approach to reducing volatility.

One pitfall worth naming: owning several funds that all track the same index isn't diversification. Two S&P 500 ETFs from different providers hold substantially the same companies, so the portfolio looks varied on a statement while the underlying exposure barely changes. Reading what a fund actually holds, rather than its name or provider, is what makes that overlap visible.

What the Routes Share, and Where They Split

An ETF and an index fund leave an investor holding the same group of large U.S. companies, top-10 concentration included. What differs is the plumbing: intraday trading and an exchange listing on one side, once-daily pricing on the other. Futures belong in a different category, a speculative contract with a steeper learning curve rather than a buy-and-hold position.

The variables that change from one investor to the next are the fund's fees, the type of account holding it, how long the position is likely to be held, and what else is in the portfolio. The exposure underneath doesn't change with the route in. It stays the same list of holdings, with ten companies accounting for more than 30% of it.