How to Invest in the S&P 500
Last updated July 2026
Short answer
You invest in the S&P 500 by buying a single low-cost fund that tracks the index, not 500 stocks yourself. The steps: open a brokerage or retirement account, choose an S&P 500 index fund or ETF (the mainstream picks are VOO, IVV, SPLG, and the mutual fund FXAIX), decide how much to invest and whether to buy all at once or on a schedule, and place the trade. Then do the boring part that actually works: keep fees low, automate contributions, reinvest dividends, and leave it alone. The cheapest funds all track the same index, so cost and your account matter more than picking a “winner.” Walnut, an AI investing app, can compare an S&P 500 fund against your existing holdings. This page is educational and is not investment advice.
The S&P 500 is the default building block of most long-term portfolios, and investing in it is far simpler than the amount written about it suggests. You are not picking stocks or timing the market; you are buying one fund that owns all 500 companies for you, at a cost of a few hundredths of a percent a year. This guide walks through what the index is, the exact steps to buy it, the small decisions that matter (which fund, which account, lump sum versus spreading it out), and the discipline that separates people who do well with it from people who do not. Nothing here is a recommendation, and Walnut is not an investment adviser.
What is the S&P 500, and why index it?
The S&P 500 is an index of about 500 of the largest US public companies, weighted by market value, and it is the most common shorthand for the US stock market. When you buy an S&P 500 fund, you own a tiny slice of all of them in one holding, so no single company sinks you and you automatically ride the overall growth of large US business.
The reason it is so widely recommended comes down to three things.
- Instant diversification. One purchase spreads your money across 500 companies and every major sector.
- Very low cost. The cheapest S&P 500 funds charge around 0.02 to 0.03 percent a year, so almost none of your return is lost to fees.
- A hard benchmark to beat. Most professional active funds fail to outperform it over the long run after fees, which is why indexing became the default.
It is not risk-free. It is concentrated in the largest US companies, it can fall sharply in a downturn, and it excludes small caps and most international stocks. It is a strong core, not a complete portfolio.
Step 1: Open an account
You need a brokerage account to buy any fund. The main choice is which kind, because the account wrapper affects your taxes far more than which S&P 500 fund you pick.
- A tax-advantaged retirement account first. If you have a 401(k) with a match, or a Roth IRA, the S&P 500 held there grows without yearly tax drag. Most people fund these before a taxable account.
- A standard brokerage account for anything beyond your retirement contributions, or if you want full flexibility to withdraw.
Any major US broker works, and most now charge no commission on ETF trades. See types of investment accounts if you are unsure which to open.
Step 2: Choose an S&P 500 fund
Every fund below tracks the same index, so their returns are nearly identical before fees. The decision is really about cost, whether you want an ETF or a mutual fund, and which brokerage you use.
| Ticker | Fund | Expense ratio | Note |
|---|---|---|---|
| VOO | Vanguard S&P 500 ETF | ~0.03% | The most popular low-cost S&P 500 ETF. |
| IVV | iShares Core S&P 500 ETF | ~0.03% | BlackRock's core S&P 500 ETF, equally low cost. |
| SPLG | SPDR Portfolio S&P 500 ETF | ~0.02% | A low share price makes round-number buys easy. |
| SPY | SPDR S&P 500 ETF Trust | ~0.09% | The oldest and most traded, slightly higher fee. |
| FXAIX | Fidelity 500 Index Fund | ~0.015% | A mutual fund version for Fidelity accounts. |
For most people at a typical broker, a low-cost ETF like VOO or IVV is the simplest choice. Inside a 401(k) or a Fidelity or Vanguard account, an index mutual fund can be more convenient because you can invest exact dollar amounts on a schedule. Our best S&P 500 ETFs guide compares the ETF options in more detail.
Step 3: Decide how much, and lump sum versus dollar-cost averaging
Two questions: how much to invest, and whether to do it all at once or spread it out.
- How much: only money you will not need for several years, since the index can fall hard in the short term. Fractional shares mean you can start with almost any amount.
- Lump sum: investing a sum you already have all at once puts it to work immediately and, historically, has often beaten waiting, because markets rise more often than they fall.
- Dollar-cost averaging: investing a fixed amount on a set schedule (say every payday) smooths your entry price and is easier to stick with. Most long-term investors end up doing this automatically with each paycheck regardless.
Neither can be timed perfectly. Picking one and being consistent beats waiting for the perfect moment.
Step 4: Buy, automate, and reinvest
The mechanics are quick, and then the point is to make it run itself.
- Place the order. Search the ticker, enter a dollar amount or number of shares, and buy. A market order is fine for a broad, liquid fund.
- Turn on automatic investing. Set a recurring purchase so contributions happen without you deciding each time. Consistency is the real engine of index investing.
- Reinvest dividends. Enable automatic dividend reinvestment so the roughly 1 to 2 percent the index pays buys more shares and compounds.
Step 5: Keep costs low and leave it alone
The hardest part of investing in the S&P 500 is doing nothing during the scary parts. The behavior that separates good outcomes from bad ones is boring on purpose.
- Stay in the cheapest share class. A few hundredths of a percent compounds over decades; do not overpay for an identical index.
- Do not trade around it. Selling in downturns and buying back after recoveries is how index investors underperform the index itself.
- Rebalance rarely, if at all. If the S&P 500 is your core, let it run and add new money; only rebalance if you hold it alongside other assets that drift out of your target mix.
Where Walnut fits
The S&P 500 is a benchmark as much as an investment, and that is where Walnut is useful. If you hold index funds and want to add a thematic tilt or a few individual names, Walnut lets you build that basket, set target weights, and see how it would have tracked against the S&P 500, so any tilt has to earn its keep versus just owning the index. You connect your real broker, chat through Claude, ChatGPT, or built-in AI, and place trades you approve yourself. If you would rather explore whether anything can outperform the index, read can you beat the S&P 500. Walnut does not tell you what to buy.
Try Walnut on top of your broker
Walnut connects any major US broker so you can see how an S&P 500 fund or a thematic tilt fits your portfolio by chatting through Claude, ChatGPT, or built-in AI. Read-only by default until you choose to trade; Walnut is not an investment adviser and does not tell you what to buy.
FAQ
How do I invest in the S&P 500?
You buy a fund that tracks the index rather than 500 separate stocks. Open a brokerage or retirement account, choose a low-cost S&P 500 index fund or ETF such as VOO, IVV, SPLG, or the mutual fund FXAIX, decide how much to invest and whether to do it all at once or on a schedule, and buy shares. Then keep fees low, automate contributions, reinvest dividends, and leave it alone. Walnut is not an investment adviser; this is educational.
What is the best S&P 500 index fund?
There is no single best one, but the mainstream low-cost options are very close to each other. VOO (Vanguard) and IVV (iShares) are the most popular ETFs at around a 0.03 percent expense ratio; SPLG is even cheaper and has a lower share price; SPY is the oldest and most liquid but slightly pricier; and FXAIX is a Fidelity mutual fund equivalent. Because they all track the same index, the deciding factors are cost, your brokerage, and whether you want an ETF or a mutual fund.
How much money do I need to start investing in the S&P 500?
Very little. Most major brokers now offer fractional shares and no trading commissions, so you can start with a few dollars and buy a slice of an S&P 500 ETF. The mutual-fund versions sometimes have a small minimum. What matters far more than the starting amount is contributing regularly over time and keeping costs low.
Is it better to buy the S&P 500 all at once or over time?
Both are valid. Investing a lump sum immediately puts your money to work sooner and, historically, has often come out ahead because markets rise more often than they fall. Dollar-cost averaging, buying the same dollar amount on a schedule, smooths out your entry price and is easier to stick with emotionally. Many people invest a lump sum they already have and then keep dollar-cost averaging with each paycheck. Neither can be timed perfectly, and that is fine.
Should I buy an S&P 500 ETF or a mutual fund?
They hold the same index, so it mostly comes down to how you like to invest. ETFs trade throughout the day, are easy to buy in any brokerage, and support fractional shares. Index mutual funds like FXAIX let you invest exact dollar amounts and set automatic recurring purchases, which is convenient inside 401(k)s and Fidelity or Vanguard accounts. Pick whichever fits your account and habits; the cost difference between the cheapest options is tiny.
Can you beat the S&P 500?
Some investors do in a given year, but the large majority of professional active funds fail to beat it consistently over long periods after fees, which is the whole reason index investing became popular. That does not mean a sector tilt or a few individual holdings can never add value; it means the index is a genuinely hard benchmark. If you build anything around the S&P 500, compare it honestly against just holding the index. See our guide on whether you can beat the S&P 500.
Does Walnut tell me to invest in the S&P 500?
No. Walnut is not a registered investment adviser and does not tell you what to buy. It can help you compare an S&P 500 fund against your existing holdings, see how a thematic basket would track against the index, and place trades you approve yourself at your own broker. Every page here is descriptive and informational, not a recommendation.
From here you can compare the best S&P 500 ETFs, read whether you can beat the S&P 500, or learn how to build a diversified portfolio around it.
Walnut is informational and is not a registered investment adviser. This page explains how S&P 500 index funds work; it is not a recommendation to buy, sell, or hold any security or fund. Investing involves risk, including the possible loss of principal, and past performance does not indicate future results. Fund fees, minimums, and details change; verify current details before making any decision. Do your own research or consult a licensed financial professional.