How to Start Investing in the S&P 500 Today

Investors can invest in the S&P 500 through index funds or ETFs that follow the index, and choose a taxable brokerage account, a 401(k), or an IRA. The S&P 500 Index tracks the largest companies in the United States based on market capitalization.

The S&P 500 Index was launched in 1957 as the first U.S. market-cap-weighted equity index and is considered the best single gauge of large-cap U.S. equities.

Here’s everything you need to know to unlock it’s investing power:

What Is the S&P 500 Index?

The index includes 500 leading U.S. companies, although the number of constituent stocks may fluctuate. The S&P 500 represents about 80% of available U.S. market capitalization. As of April 30, 2025, 503 constituents comprise the S&P 500, with an estimated $49.55 trillion total market capitalization.

S&P 500 stocks reflect the U.S. economy’s growth drivers. The top 10 constituents of the S&P 500 by index weight include:

1. Apple Inc. (AAPL)
2. Microsoft Corp. (MSFT)
3. Nvidia Corp. (NVDA)
4. Amazon.com Inc. (AMZN)
5. Meta Platforms Inc. Class A (META)
6. Berkshire Hathaway B (BRK.B)
7. Alphabet Inc. A (GOOGL)
8. Broadcom Inc. (AVGO)
9. Tesla Inc. (TSLA)
10. Alphabet Inc. C (GOOG)

Three sectors hold the largest concentration of companies in the S&P 500 (as of April 30, 2025): information technology (30.3%), financials (14.5%), and health care (10.8%).

Why Investors Choose the S&P 500

Index investing allows individuals to effectively follow the market activity of up to 500 companies with the S&P 500. An index fund or exchange-traded fund (ETF) that benchmarks to the S&P 500 allows investors to gain exposure to all those stocks.

ETFs focus on passive index replication, giving investors access to every security within a particular index. Index ETFs are generally low-cost and trade throughout the day just like stocks. Consequently, they are highly liquid and subject to intraday price fluctuations. Nearly all major brokerages and fund companies offer some type of S&P 500 fund, such as the iShares S&P 500 Value ETF (IVE), the SPDR Portfolio S&P 500 Value ETF (SPYV), and the Vanguard S&P 500 Value ETF (VOOV).

S&P 500 index funds tend to have slightly higher fees than ETFs because of higher operating expenses. Because a mutual fund has a structure that differs from an ETF, investors can only buy it at the day’s closing price, based on the fund’s net asset value (NAV).

How To Invest in the S&P 500

To invest in S&P 500 ETFs, investors can gain exposure through discount brokers with commission-free trading. S&P 500 index funds trade through brokers and discount brokers and may be accessed directly from the fund companies. Investors may also access ETFs and mutual funds through employer 401(k) programs, individual retirement accounts (IRAs), or roboadvisor platforms.

The expense ratio for ETFs is the overall annual cost paid to the fund manager by investors. Many mutual funds include loads or commissions paid to the fund managers. These may be classified as front-end or back-end loads.

Investors can review the performance by accessing the fact sheet for every investment on the company’s website that offers the ETF or the mutual fund. Using the name and ticker symbol of the funds, investors can then determine the amount of capital they have to invest.

Advantages of Investing in the S&P 500

• Exposure to the world’s most dynamic companies: Investing in the S&P 500 exposes individuals to some of the world’s most dynamic companies, such as Apple, Amazon, Walmart, and Johnson & Johnson.
• Consistent long-term returns: Although returns in any single year can vary widely, over a long-term period, the S&P 500 has consistently performed strongly.
• Intricate analysis not required: Investing in the S&P 500 through an ETF or index fund means investors do not have to analyze or pick stocks.
• Can serve as a core holding: S&P 500 index funds and ETFs are liquid and trade with tight bid-ask spreads, making S&P 500 funds and ETFs ideal as core holdings for most investment portfolios.

Disadvantages of Investing in the S&P 500

• The index is dominated by large-cap companies: The S&P 500 is dominated by large-cap companies, with its 10 biggest constituents accounting for more than one-third of the index. This means that the S&P 500 index has limited exposure to small-cap and mid-cap stocks that may have the ability to grow much faster.
• The index has risks inherent in equity investing: The S&P 500 has risks inherent in equity investing, such as volatility and downside risk. Newer investors may find it difficult to tolerate such volatility.
• Only includes U.S. companies: The S&P 500 only includes U.S. companies.

The Bottom Line

Investing in an S&P 500 index fund is a way to diversify an investor’s portfolio. An ETF or a mutual fund allows investors to gain exposure to a variety of stocks included in the index, such as Apple, Microsoft, or Walmart.