The S&P 500 is widely recognized as the best single gauge of the large-cap U.S. equities. The index consists of the top 500 companies in the U.S. listed on major stock exchanges as per their market capitalization.
Top 10 Constituents by Index Weight
|BRK.B||Berkshire Hathaway Inc. New Common Stock||
|JNJ||Johnson & Johnson||
|PG||Procter & Gamble||
What is the S&P 500?
Established in 1957, the S&P 500 was the 1st market-cap-weighted stock market index in the U.S. Currently, the S&P 500 is used globally as a benchmarking tool to reflect the market performance of leading companies from different industrial sectors. The S&P 500 has over $11.2 trillion benchmarked and a combined total of $4.6 trillion as its assets under management (AUM).
There are several exchange-traded fund (ETF) issuers that base their investment products on the S&P 500. Most notable among them are Direxion, iShares, Invesco and Vanguard. However, there are certain criteria that companies need to adhere to be included in the S&P 500.
1. As per the S&P 500 methodology, all constituents must be U.S. companies.
2. Companies must have an unadjusted market cap of $8.2 billion or greater.
3. Companies must have a float market cap of at least $4.1 billion.
4. Companies must have positive earnings reported over the most recent quarter and the last 4 quarters.
5. Company stocks must have high liquidity and trade more than 250,000 shares in each of the 6 months leading up to the evaluation date.
Best S&P 500 Funds Right Now
New investors and seasoned traders are eager to put their money behind index funds. By investing in ETFs that track the S&P 500, you can own a diverse portfolio of stocks at a margin of the cost.
There are a few factors that you need to evaluate before investing in index funds. These factors include the stock’s return rate, liquidity, company holdings composition, expense ratio and AUM.
You can consider investing in these top S&P 500 funds right now.
1. SPDR S&P 500 ETF (NYSEARCA: SPY)
The SPDR S&P 500 ETF is among the largest and most heavily-traded ETFs in the world. It exposes your portfolio to large-cap U.S. companies such as Apple, Microsoft, Amazon and Facebook. While the SPDR S&P 500 ETF can be promising for long-term investors, it is more popular among active day traders as a way to balance their portfolios between risky and safe assets.
Since its launch in 1993, SPY has an expense ratio of 0.09% and a P/E ratio of 39.87. It is very liquid, trading an average of 78.70 million shares daily and pays a 1.50% dividend yield. SPY has a 1-year return of 30.83%, a 3-year return of 14% and a 5-year return of 16.71%.
2. iShares Core S&P 500 ETF (NYSEARCA: IVV)
The iShares Core S&P 500 ETF exposes your portfolio to large and established U.S. companies. These companies include Alphabet, Berkshire Hathaway, Johnson & Johnson and Visa. This ETF can be profitable for buy-and-hold investors in the long run.
Publicly listed since 2000, the iShares Core S&P 500 ETF has an expense ratio of 0.04% and a P/E ratio of 22.35. It trades more than 87,561 shares per day. The iShares Core S&P 500 has a total AUM of $209 billion with an annual dividend yield of $6.77 per share. It has a 1-year return rate of 11.62%, 3-year return rate of 38.64% and a 5-year return rate of 76.30%.
3. Vanguard S&P 500 ETF (NYSEARCA: VOO)
Open to trade since 2010, Vanguard S&P 500 exposes your portfolio to mega-cap companies in the U.S. These companies include Microsoft, Procter & Gamble Co., NVIDIA Corp. and Mastercard.
Vanguard S&P 500 ETF has an expense ratio of 0.03% and a P/E ratio of 25.7. It has an annual dividend yield of $5.35 per share and has a total AUM of $157 billion. The ETF trades more than 169,818 shares per day. It has a 1-year return rate of 11.42%, a 3-year return rate of 38.28% and a 5-year return rate of 76.85%.
4. iShares S&P 500 Growth ETF (NYSEARCA: IVW)
The iShares S&P 500 Growth ETF exposes your portfolio to stocks from industries such as information technology, consumer discretionary, communication and health care. These companies are still in the early stages of their life cycle and offer tremendous profit potential to young investors.
It has an expense ratio of 0.18% and a P/E ratio of 32.36. The iShares S&P 500 Growth ETF has an annual dividend yield of $2.80 per share. It has high liquidity and trades over 2.5 million shares per day and has a total AUM of $28 billion. iShares S&P 500 Growth ETF has a 1-year return rate of 26.54%, a 3-year return rate of 61.61% and a 5-year return rate of 107.07%.
5. SPDR Portfolio S&P 500 Growth ETF (NYSEARCA: SPYG)
The SPDR Portfolio S&P 500 Growth ETF seeks to provide investment results that correspond to the total return performance of the S&P 500 Growth Index. It exposes you to large-cap U.S. companies such as Mastercard, Adobe, PayPal and Salesforce.com.
Launched in 2000, the SPDR Portfolio S&P 500 Growth ETF has an expense ratio of 0.04% and a P/E ratio of 31.33. It has an annual dividend yield of $0.52 per share and a total AUM of $8.9 billion. SPDR Portfolio S&P 500 Growth ETF has a 1-year return rate of 26.63%, a 3-year return rate of 62.08% and a 5-year return rate of 107.47%.
6. Invesco S&P 500 Equal Weight ETF (NYSEARCA: RSP)
The Invesco S&P 500 Equal Weight ETF exposes your portfolio to multi-cap companies in the U.S. These companies include Darden Restaurant, Lam Research Corp., Twitter, Paycom Software and FedEx.
The ETF has been publicly listed since 2003. Invesco S&P 500 Equal Weight ETF has an expense ratio of 0.20% and has a P/E ratio of 18.94. It has an annual dividend yield of $2.12 per share and has a total AUM of $13 billion. Invesco S&P 500 Equal Weight ETF trades over 102,433 shares per day. It has a 1-year return rate of 3.01%, a 3-year return rate of 23.29% and a 5-year return rate of 53.73%.
Best Online Brokers for Index Funds
Index funds offer instant diversification for your stock portfolio and can be suitable for traders new to investing. Before you begin to invest your money in index funds, you need an online broker to help you buy and trade shares.
Most online brokers let you trade index funds and ETFs commission-free. These online brokers also feature advanced trading tools and educational resources to improve your trading tactics.
Here’s a rundown of the best online brokers on the market.
Diversify Your Portfolio and Derive Profits
The S&P 500 tracks the performance of leading global companies. The index funds that mirror the S&P 500 have huge potential for profits in the long-run and provide instant diversification to your stock portfolio. The low expense ratios also make index funds affordable to investors with limited capital.
Turn to Webull
0 Commissions and no deposit minimums. Everyone gets smart tools for smart investing. Webull supports full extended hours trading, which includes full pre-market (4:00 AM - 9:30 AM ET) and after hours (4:00 PM - 8:00 PM ET) sessions. Webull Financial LLC is registered with and regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). It is also a member of the SIPC, which protects (up to $500,000, which includes a $250,000 limit for cash) against the loss of cash and securities held by a customer at a financially-troubled SIPC-member brokerage firm.