Standard & Poor's Index Fund: What It Is and How to Buy

If you have ever heard someone say "just buy the S&P 500," they were talking about a Standard & Poor's index fund. It is one of the most recommended investments for beginners, and for good reason.

A Standard & Poor's index fund lets you own a small piece of 500 of the largest U.S. companies in a single, low-cost purchase. Instead of trying to pick winning stocks, you simply track the whole market and let it grow over time. This guide explains how these funds work, names the top options with real expense ratios, and shows you how to buy one.

What Is a Standard & Poor's Index Fund?

The S&P 500 is a stock market index created by Standard & Poor's. It tracks the performance of about 500 of the largest publicly traded companies in the United States, names like Apple, Microsoft, and Amazon.

A Standard & Poor's index fund is an investment fund built to mirror that index. When you buy one share, your money is spread across all 500 companies in roughly the same proportions as the index itself.

This is called passive investing. The fund is not trying to beat the market; it is trying to match it. Because there is no expensive team of managers picking stocks, these funds charge very low fees.

Why S&P 500 Index Funds Are So Popular

The appeal comes down to three things: diversification, low cost, and a strong long-term track record. One purchase spreads your money across hundreds of companies and many industries, which is a simple form of diversification that lowers the risk of any single company sinking your investment.

Historically, the S&P 500 has averaged roughly 10% annual returns over the long term, though returns vary widely year to year and past performance does not guarantee future results. In some years the index falls 20% or more, so it is a long-term tool, not a quick win.

The low fees matter enormously over decades. A fund charging 0.015% costs almost nothing, while an actively managed fund might charge 0.5% to 1% or more, quietly draining your returns year after year.

Top Standard & Poor's Index Funds to Know

Several funds track the same S&P 500 index, so the main differences are the expense ratio and whether the fund is a mutual fund or an ETF. Here is how the most popular options compare as of June 2026.

All four hold the same underlying companies, so their performance is nearly identical before fees. The biggest visible gap is SPY at 0.09%, which is noticeably pricier than the others, mostly because it is the oldest and most heavily traded S&P 500 ETF.

Mutual Fund vs ETF: What's the Difference?

This is the main practical decision. FXAIX and SWPPX are mutual funds, while VOO and SPY are exchange-traded funds (ETFs). Both can track the S&P 500, but they trade differently, and the ETF vs mutual fund comparison comes down to how and when you buy.

An ETF like VOO trades on the stock market throughout the day, just like a stock, and you can often buy fractional shares. A mutual fund like FXAIX trades once per day after the market closes, at that day's set price.

For most long-term investors, the difference barely matters. ETFs offer more flexibility and are easy to buy across many brokers, while mutual funds like the Fidelity 500 Index Fund shine if you are already inside that fund family's platform, such as Fidelity.

How Expense Ratios Affect Your Returns

The expense ratio is the yearly fee the fund charges, shown as a percentage of your balance. It is automatically deducted, so you never see a bill, but it still reduces your returns.

Here is a real example. On a $10,000 balance, FXAIX at 0.015% costs about $1.50 a year, while SPY at 0.09% costs about $9 a year. The difference looks tiny, but over 30 years of compounding on a growing balance, the cheaper fund can leave you with meaningfully more money.

This is why cost-conscious investors lean toward the lowest-expense options. At these near-zero levels, though, all four funds are excellent, and convenience often matters more than a fraction of a percent.

How to Buy a Standard & Poor's Index Fund

Buying one is straightforward once you have a brokerage account. If you want a full walkthrough, our guide on how to buy the S&P 500 covers each step in detail. Here are the basics.

1. Open a brokerage or retirement account with a broker that offers the fund you want.
2. Fund the account by linking your bank and transferring money in.
3. Search for the fund by its ticker (such as FXAIX, VOO, SPY, or SWPPX).
4. Enter the dollar amount or number of shares you want to buy.
5. Place the order and set up recurring contributions if you want to invest automatically.

Where you buy depends on the fund and your preferences. Robinhood offers $0 commission trading and lets you buy S&P 500 ETFs like VOO or SPY, often with fractional shares so you can start with just a few dollars instead of paying for a whole share (current as of June 2026). That makes it an easy on-ramp if you want to begin tracking the index with a small first purchase.

Public also offers $0 commission trading and fractional shares of ETFs like VOO and SPY, in a polished mobile app that also covers stocks, bonds, and a high-yield cash account. If you want to hold an S&P 500 index fund alongside other investments in one modern, beginner-friendly place, Public is a strong fit.

If you want Fidelity's in-house FXAIX or its ZERO-fee index funds, you would open a Fidelity investment account directly. To track your investment alongside your other accounts, a budgeting app like Monarch Money can pull everything into one view.

Whichever route you choose, the strategy is the same: buy one of the best index funds tracking the S&P 500, contribute regularly, and hold for the long term. All fund details and expense ratios here are current as of June 2026 and can change, so confirm them with the provider before investing.

Frequently Asked Questions

What is the cheapest S&P 500 index fund?

Among the most popular options as of June 2026, the Fidelity 500 Index Fund (FXAIX) is the cheapest at about 0.015%, followed by Schwab's SWPPX at 0.02% and Vanguard's VOO at 0.03%. SPY is the priciest of the four at 0.09%. All track the same index, so performance before fees is nearly identical.

Is FXAIX or VOO better?

Neither is clearly better; they track the same S&P 500 index with almost identical returns. FXAIX is a mutual fund that trades once daily and works best inside a Fidelity account, while VOO is an ETF that trades all day and is available across many brokers. The right choice depends on which platform you use.

How much money do I need to buy an S&P 500 index fund?

Less than you might think. Many brokers offer fractional shares of ETFs like VOO and SPY, so you can start with just a few dollars. Some mutual funds, including FXAIX, have no minimum investment, making it easy to begin with a small amount.

Can I lose money in an S&P 500 index fund?

Yes. The S&P 500 can and does fall, sometimes 20% or more in a single year, so you can lose money, especially over short periods. These funds are designed for long-term investing, where market downturns have historically been followed by recoveries, though past performance does not guarantee future results.