The funds that track the S&P 500 differ mainly in cost and account type, not in what they hold
An S&P 500 index fund holds the same 500 large US companies no matter which fund you choose. The real differences are the expense ratio (what you pay annually to own the fund), the minimum investment, and whether the fund is offered through a brokerage, a retirement account, or both. Three fund families dominate this space: Vanguard, Fidelity, and Schwab. Each offers multiple versions of an S&P 500 fund, and the lowest-cost options from each charge between 0.03% and 0.04% per year — meaning you pay roughly $3 to $4 annually for every $10,000 you invest.
The choice between them usually comes down to where you already have money or where you plan to open an account. If you use Vanguard, Fidelity, or Schwab for other investments, buying their S&P 500 fund there keeps everything in one place. If you are opening a new account specifically for index funds, all three are equally straightforward to use, and the cost difference between the cheapest options is negligible.
Key Takeaways
- Vanguard VOO, Fidelity FSKAX, and Schwab SWTSX are the three lowest-cost S&P 500 index funds, each charging 0.03% to 0.04% annually.
- All three funds hold the identical 500 companies, so performance differences come only from fees and minor timing variations in how dividends are reinvested.
- Vanguard and Fidelity require no minimum investment if you buy through their websites; Schwab requires $1 to start but charges the same low fee.
- If you are saving for retirement, the same S&P 500 fund is often available inside an IRA or 401(k), where the account type matters more than the fund choice.
Vanguard VOO and VFIAX: Which one to choose
Vanguard offers two S&P 500 index funds: VOO (Vanguard S&P 500 ETF) and VFIAX (Vanguard S&P 500 Index Fund Admiral Shares). Both charge 0.03% annually and hold the same 500 stocks. The difference is the account structure. VOO is an exchange-traded fund (ETF), meaning you buy and sell it like a stock during market hours. VFIAX is a mutual fund, meaning you buy and sell it once per day after the market closes.
For most people, VOO is simpler. You can buy it through any brokerage, including Vanguard, Fidelity, or Schwab. VFIAX requires you to have a Vanguard account. If you already use Vanguard for a retirement account or other investments, VFIAX is fine. If you are starting fresh and want to keep options open, VOO is the safer choice because you can move it to another brokerage later without complications.
Fidelity FSKAX: No minimum, no account restrictions
FSKAX (Fidelity S&P 500 Index Fund) charges 0.035% annually and requires no minimum investment. Like VFIAX, it is a mutual fund, so you buy and sell once per day. The main advantage is that Fidelity allows you to open an account and buy FSKAX with any amount of money — even $1. Vanguard's VFIAX technically has no minimum either, but Vanguard's account setup process is more formal.
FSKAX works well if you plan to use Fidelity as your primary brokerage or if you want to start investing with a small amount and add to it over time. The fee is marginally higher than Vanguard's, but the difference on a $10,000 investment is about $0.50 per year — not a meaningful factor in your decision.
Schwab SWTSX: Built for Schwab customers
SWTSX (Schwab U.S. Large-Cap ETF) charges 0.03% annually, matching Vanguard's lowest rate. It is technically an ETF but trades like a mutual fund through Schwab's platform, meaning you can buy fractional shares and do not have to time your purchase to market hours. Schwab requires a $1 minimum to open an account.
SWTSX is the right choice if you already use Schwab for a brokerage account or retirement plan. If you do not, opening a Schwab account just to buy this fund adds an extra step compared to buying VOO or FSKAX through any brokerage. Schwab's platform is user-friendly, but the fund itself offers no advantage over the Vanguard or Fidelity alternatives.
How fees compound over decades
The difference between a 0.03% fee and a 0.10% fee looks small, but it compounds. On a $100,000 investment held for 30 years, assuming 7% annual returns, the 0.07% difference in fees costs you roughly $7,000 in lost growth. This is why even tiny differences in expense ratios matter when you are comparing index funds.
Avoid S&P 500 funds that charge more than 0.10% annually. Some brokerages offer their own S&P 500 funds with higher fees, and some financial advisors recommend actively managed funds that claim to beat the S&P 500 but charge 0.50% to 1.00% or more. The data shows that most active managers do not beat the index after fees, so the low-cost index fund is the better choice for most investors.
S&P 500 funds inside retirement accounts
If you are saving for retirement through an IRA or 401(k), the S&P 500 fund you choose matters less than the account type. A traditional IRA or Roth IRA lets you pick any fund offered by your brokerage, so you can choose VOO, FSKAX, or SWTSX based on where you have the account. A 401(k) through your employer usually offers a limited menu of funds, and an S&P 500 index option may or may not be available.
If your 401(k) offers an S&P 500 index fund, use it — the fee is usually reasonable, and contributions reduce your taxable income. If it does not, look for a total stock market index fund or a target-date fund as an alternative. After you leave the job, you can roll the 401(k) into an IRA and choose a lower-cost S&P 500 fund at that point.
Comparing the three side by side
| Fund | Annual Fee | Account Type | Minimum Investment | Best For |
|---|---|---|---|---|
| Vanguard VOO | 0.03% | ETF (buy/sell during market hours) | $1 | Any brokerage; most flexible |
| Vanguard VFIAX | 0.03% | Mutual fund (once per day) | $3,000 | Vanguard customers only |
| Fidelity FSKAX | 0.035% | Mutual fund (once per day) | $1 | Starting small; Fidelity customers |
| Schwab SWTSX | 0.03% | ETF (fractional shares available) | $1 | Schwab customers only |
Frequently Asked Questions
Does it matter which S&P 500 fund I pick if they all hold the same stocks?
The funds perform almost identically because they hold the same 500 companies. The only meaningful difference is the annual fee. Over 20 or 30 years, a 0.07% difference in fees can cost you thousands of dollars in lost growth. Pick whichever fund has the lowest fee and is available through your brokerage.
Can I switch from one S&P 500 fund to another without paying taxes?
If both funds are in a tax-advantaged account like an IRA or 401(k), you can switch without tax consequences. If they are in a regular brokerage account and you have gains, selling one fund to buy another triggers capital gains tax. Check your account type and your cost basis before switching.
What if my brokerage does not offer VOO, FSKAX, or SWTSX?
Look for any S&P 500 index fund offered by your brokerage and check its annual fee. If it charges 0.10% or less, it is acceptable. If it charges more than 0.20%, consider opening a new account at Vanguard, Fidelity, or Schwab where you can access a lower-cost option.
Should I buy an S&P 500 fund or a total stock market fund?
An S&P 500 fund covers the 500 largest US companies. A total stock market fund covers those plus mid-size and small companies. Both are reasonable choices. The S&P 500 is simpler and slightly cheaper; total market funds offer broader diversification. Either one works for long-term investing.
Is it better to buy one lump sum or invest gradually over time?
Research shows that lump-sum investing usually outperforms gradual investing over long periods, but gradual investing feels less risky psychologically. The fund choice does not change this — whatever you decide, pick the lowest-cost option and stick with it.