You can invest in the S&P 500 through a brokerage account by buying index funds or exchange-traded funds that track it

The S&P 500 is a collection of 500 large U.S. companies. You do not buy the index itself — instead, you buy a fund that holds all 500 stocks for you. The two main ways to do this are index mutual funds and exchange-traded funds (ETFs). Both let you own a piece of all 500 companies with a single purchase. You will need a brokerage account (a place to hold and trade investments) to buy either one.

The process is straightforward: open an account at a brokerage, deposit money, search for an S&P 500 fund by name, and place an order. Most brokerages charge no commission to buy funds. The whole setup takes less than an hour. The main decision is which fund to choose — they all track the same 500 companies, but fees and features differ slightly.

Key Takeaways

  • You need a brokerage account to buy S&P 500 funds; common brokerages include Fidelity, Vanguard, Charles Schwab, and E*TRADE, and most charge no commission.
  • Index mutual funds and ETFs both track the S&P 500, but mutual funds settle at the end of the day while ETFs trade throughout the day like stocks.
  • Expense ratios (annual fees) range from about 0.03% to 0.20% depending on the fund, so comparing costs matters over time.
  • You can invest a lump sum or set up automatic monthly contributions, and most brokerages allow both in regular and retirement accounts.

Opening a brokerage account

A brokerage account is simply a place where you hold investments and trade them. You open one by going to a brokerage website, providing your name, address, Social Security number, and employment information, and linking a bank account. The process is online and takes 10 to 20 minutes. You will need to verify your identity, which the brokerage does electronically.

Popular brokerages include Fidelity, Vanguard, Charles Schwab, E*TRADE, and Robinhood. Each one offers S&P 500 funds with low or no fees. If you already have a retirement account (a 401(k) or IRA), you may already have a brokerage account through your employer or bank. You can also open a separate taxable account for additional investing.

Once your account is open and you have deposited money, you are ready to buy. Most brokerages let you fund your account by linking a checking or savings account and transferring money electronically. The transfer usually takes one to three business days to arrive.

Index mutual funds versus ETFs

Both index mutual funds and ETFs hold the same 500 stocks and track the S&P 500. The main difference is how they trade. A mutual fund is priced once per day, after the market closes. You place an order during the day, but the purchase happens at that day's closing price. An ETF trades throughout the day like a stock, so you can buy and sell at any time while the market is open and see the price change in real time.

For most people investing money they plan to hold for years, this difference does not matter. Mutual funds are simpler if you are setting up automatic monthly investments. ETFs are useful if you want to trade during the day or use advanced order types. Both charge low annual fees (called expense ratios) — typically 0.03% to 0.20% per year.

Common S&P 500 index funds include the Vanguard 500 Index Fund (mutual fund), the Fidelity 500 Index Fund (mutual fund), and the Vanguard VOO ETF and iShares IVV ETF (both ETFs). All four track the same index and have expense ratios under 0.10% per year.

Understanding expense ratios and fees

An expense ratio is the annual cost of owning a fund, expressed as a percentage of your investment. If a fund has a 0.05% expense ratio and you own $10,000 in it, you pay $5 per year in fees. The brokerage deducts this automatically — you do not write a check.

S&P 500 index funds are among the cheapest investments available because they simply hold the same 500 stocks in the same proportions. They do not require active management or research. Expense ratios range from about 0.03% (Vanguard's funds) to 0.20% (some smaller providers). Over 20 years, the difference between a 0.03% fund and a 0.20% fund can add up to thousands of dollars in savings on a large balance.

Most brokerages charge no commission to buy or sell funds. Some brokerages may charge a small fee for certain transactions, but the major ones (Fidelity, Vanguard, Schwab) do not. Always check the brokerage's fee schedule before opening an account.

How to place your first order

Once your account is funded, log in to your brokerage and look for the "Buy" or "Trade" section. Search for the fund you want by its ticker symbol — for example, VOO (Vanguard S&P 500 ETF), IVV (iShares Core S&P 500 ETF), or VFIAX (Vanguard 500 Index Fund). The search will show you the current price and basic information about the fund.

Enter the amount you want to invest. You can buy a specific dollar amount (for example, $1,000) or a specific number of shares. For mutual funds, you usually buy by dollar amount. For ETFs, you can buy by dollar amount or by number of shares. Review the order details and confirm the purchase. The order will process immediately for ETFs or at the market close for mutual funds.

After the purchase, the fund will appear in your account holdings. You can check its value anytime by logging in. If you want to add money regularly, most brokerages let you set up automatic monthly transfers and purchases.

Investing in retirement accounts versus taxable accounts

You can buy S&P 500 funds in different types of accounts, and the type matters for taxes. A 401(k) (offered by employers) and an IRA (individual retirement account) are tax-advantaged accounts. Money grows without being taxed each year, and you pay taxes only when you withdraw it in retirement. A taxable brokerage account is a regular investment account where you pay taxes on gains and dividends each year.

If your employer offers a 401(k) with an S&P 500 fund option, that is usually the best place to start because employers often match contributions. If you do not have access to a 401(k), you can open an IRA (traditional or Roth) at any brokerage and buy S&P 500 funds inside it. For money beyond your IRA limit, use a taxable account.

The annual contribution limits for IRAs are set by the IRS and change each year. For 2024, the limit is $7,000 per year (or $8,000 if you are 50 or older). 401(k) limits are higher. A taxable account has no contribution limit.

Dollar-cost averaging and lump-sum investing

Dollar-cost averaging means investing a fixed amount regularly — for example, $500 per month — regardless of the fund's price. Lump-sum investing means putting in a large amount all at once. Research shows that lump-sum investing tends to outperform dollar-cost averaging over long periods, but both work if you stay invested for years.

Most people use dollar-cost averaging because it matches how they earn money (a paycheck each month) and feels less risky psychologically. You can set up automatic monthly investments at almost any brokerage by linking your bank account and scheduling transfers. The brokerage will buy the fund automatically each month.

If you have a large sum to invest (for example, from a bonus or inheritance), you can invest it all at once. The key is to start investing and stay invested. Trying to time the market — waiting for a price drop — usually costs more than it saves.

Frequently Asked Questions

Do I need a lot of money to start investing in the S&P 500?

No. Most brokerages have no minimum investment. You can start with $1, $10, or $100. Some brokerages let you buy fractional shares, meaning you can invest any dollar amount even if it does not equal a whole share price. Start with whatever you can afford and add more over time.

What is the difference between a Roth IRA and a regular brokerage account for S&P 500 investing?

A Roth IRA lets your money grow tax-free and you pay no taxes on withdrawals in retirement, but you can only contribute $7,000 per year (as of 2024) and cannot withdraw earnings before age 59½ without a penalty. A regular brokerage account has no contribution limit or withdrawal restrictions, but you pay taxes on gains and dividends each year. Use a Roth IRA first up to the limit, then a regular account for additional money.

Can I lose money investing in the S&P 500?

Yes. The S&P 500 goes up and down with the stock market. Over short periods (months or a year), you can lose money. Over long periods (10+ years), the S&P 500 has historically gained value, but past performance does not may provide future results. Only invest money you do not need for at least five years.

Should I pick a mutual fund or an ETF?

For most people, either works. Mutual funds are simpler for automatic monthly investing. ETFs trade throughout the day and may appeal if you want more control over timing. Both have low fees. Pick whichever your brokerage makes easiest to use.

Can I invest in the S&P 500 through my employer's 401(k)?

Often yes. Many 401(k) plans offer S&P 500 index funds or similar large-cap index options. Check your plan's investment menu. If your employer matches contributions, prioritize the 401(k) first — the match is assistance programs. After maxing the match, you can open an IRA or taxable account for additional investing.