Best S&P 500 ETFs June 2024
Nearly all ETFs track indexes — and index investing is a strategy that has proven its worth over the decades. Of all the indexes an ETF can mirror, the S&P 500 remains the standard-bearer benchmark for the overall stock market.
Read Next: 6 Unusual Ways To Make Extra Money (That Actually Work)
It represents the 500 largest U.S.-based companies, which collectively account for roughly 80% of all available global market capitalization — as goes the S&P 500, so goes the stock market as a whole.
There was a time when investors would have had to buy individual shares of all 500 companies if they wanted to match the index’s performance. But today, a single share of a single ETF can buy modern investors a slice of every single one. But that’s not the only way to invest in the S&P 500. Some investors want the benefits of investing in large S&P 500 companies but focus on segments of the index rather than the entire thing.
Core ETFs vs. Tactical ETFs — What’s the Difference?
Core S&P 500 ETFs are the funds most people think of when they hear the term “index fund.” These are the ETFs that track the overall S&P 500. Investors typically buy them as long-term investments. They’re relatively simple investments because they require little individual decision-making. You’re investing in the overall market and not just an individual sector.
Core ETFs serve as a portfolio’s backbone. Once you have one in place, you can invest in more narrowly focused S&P 500 ETFs to round out your holdings.
Those narrow ETFs track a segment or sector of the S&P 500. They’re called tactical ETFs because you can use them to customize and nudge the balance of your portfolio as needed to address specific investment goals and preferences or in response to current market trends. For example, you might select an ETF that only invests in S&P 500 stocks that earn dividends or are primed for growth — about half of those on the index.
Investors often hold tactical ETFs in the short or medium term.
What Are the Best Core ETFs for the S&P 500?
An ETF tracks the S&P 500 as the quintessential index investment — for many investors, shares in one comprise their entire portfolio. Since they’re passively managed funds designed to mirror the underlying index, S&P 500 ETFs are inherently very similar.
Here’s what you need to know about the subtle differences between leading core ETFs:
1. State Street SPDR S&P 500 ETF (SPY)
Expense ratio: 0.0945%
In January 1993, State Street started the ETF revolution when it debuted the SPDR S&P 500 ETF, history’s first U.S.-listed exchange-traded fund. Three decades later, the mother of the ETF movement remains the gold standard of S&P 500 index funds.
SPY boasts one of the highest trading volumes and the largest assets under management (AUM) — not just among S&P 500 funds, but all ETFs. Like all S&P 500 ETFs, its holdings represent all 11 GICS sectors and roughly two dozen industries. Also, like the rest of the bunch, it pays a dividend that roughly mirrors the index — SPY’s 30-day SEC yield is currently 1.23%.
2. Vanguard S&P 500 ETF (VOO)
Expense ratio: 0.03%
Vanguard is the world’s second-biggest ETF provider of assets under management and ranks in the Top 10 for the number of funds provided with 86. Even more important than its size is Vanguard’s unique ownership structure.
In 1975, Vanguard disrupted the industry with a new model giving the reins not to outside investors, but to its shareholders. The company is owned by its funds, the people who buy them. The model — which Vanguard says lowers expenses and eliminates conflicts of interest — remains unique in the asset-management industry.
Which ETF Is Better, VOO or SPY?
“Better” is in the eye of the investor. Some might be attracted to the sheer size of State Street, while others might prefer Vanguard’s investor-forward ownership structure. But one thing that’s not subjective in the VOO vs. SPY rivalry is the huge gap between their expense ratios — more on that in a bit.
Is Vanguard S&P 500 ETF a Good Investment?
Vanguard has earned legions of loyal fans through its unique ownership structure and dirt-cheap funds, which cost next to nothing to own. But other players offer similar benefits.
3. iShares Core S&P 500 ETF (IVV)
Expense ratio: 0.03%
SPY and VOO are probably the two most recognizable names in the S&P 500 ETF game — but they’re hardly alone. No investment firm in the world is bigger than BlackRock, and its iShares family of ETFs is among the world’s biggest and most trusted family of funds.
With a history dating back to March 2000, IVV is one of the oldest funds and the only S&P 500 ETF with greater AUM than SPY. Like VOO, it closely mirrors SPY, but at less than a third of the cost.
4. State Street SPDR Portfolio (SPLG)
Expense ratio: 0.03%
SPLG holds the same 503 companies as State Street’s flagship ETF. The difference is in liquidity — SPLG has far less AUM and a much lower trading volume than SPY.
For investors, those factors translate into much lower costs, both in the purchase price and long-term ownership expenses. SPLG currently trades for around $63.15 per share compared to SPY, which trades for nearly nine times more at $536.95 per share. It also reduces the expense ratio by a third, from nearly 0.1% to a minuscule 0.02%.
5. Schwab S&P 500 Index Fund (SWPPX)
Expense ratio: 0.02%
First listed in 1997, Schwab’s offering has one of the longest tenures on the market — but it stands out for another reason. Its expense ratio beats nearly every fund money can buy — index investors can’t get much closer to free than 0.02%.
What Are the Best Tactical ETFs for the S&P 500?
You’ll find much more variation among tactical S&P 500 ETFs than core funds because tactical ETFs target certain aspects of the index and not the whole thing. Tactical ETFs often have higher expense ratios, but they also outperform the overall index — which is why investors trade them more frequently than total index funds.
With more variation among tactical ETFs in terms of holdings, performance and expenses compared to core ETFs, you’ll want to research funds more carefully before you invest.
The following ETFs are worth considering:
Invesco S&P 500 Equal Weight ETF (RSP)
Expense ratio: 0.20%
The S&P 500 index weights companies by market capitalization, so the largest — Microsoft, which comprises 6.84% of the portfolio — has much more influence than the smallest — News Corporation, which makes up just 0.01%. Equal-weight funds like Invesco’s RSP give each stock equal weight.
Although BlackRock also has an equal-weight S&P 500 ETF with the same expense ratio as RSP, it was introduced just last year, so it doesn’t have RSP’s track record.
SPDR Portfolio S&P 500 Growth ETF (SPYG)
Expense ratio: 0.04%
SPDR’s SPYG is the past year’s best-performing S&P 500 Growth Index ETF, and it’s also significantly less expensive than Vanguard and BlackRock, which have expense ratios of 0.10% and 0.18%, respectively.
The S&P Growth Index selects S&P 500 stocks that appear poised for growth based on sales growth, earnings change relative to price and momentum, or price change.
Vanguard S&P 500 Value ETF (VOOV)
Expense ratio: 0.10%
Vanguard’s VOOV ETF isn’t the cheapest S&P 500 value ETF, but it does have a slight performance advantage over BlackRock’s and State Street’s versions.
Unlike some ETF portfolios, which are balanced quarterly, it’s balanced just once yearly, in December. It includes those S&P 500 stocks displaying value characteristics like favorable book-value-to-price ratio, earnings-to-price ratio and sales-to-price ratio.
What Is the Cheapest S&P 500 ETF?
The cheapest ETF has the lowest expense ratio, the fee investors pay for portfolio management. Since they’re passively managed, ETFs typically have much lower expense ratios than traditional actively managed mutual funds — but pinch your pennies because those fees add up over time.
A 0.5% expense ratio fund charges $50 for every $10,000 invested. On the other hand, an ETF with a 0.03% expense ratio charges just $3 for every $10,000 invested.
How To Choose an S&P 500 ETF
ETFs aren’t created equal, even following the same benchmark index. So how do you choose the best one for you?
Pick a strategy: Are you looking for a core holding to keep in your portfolio indefinitely, or are you looking to customize your portfolio with stocks representing a segment of the S&P 500?
Research funds consistent with your chosen strategy: For core S&P 500 ETFs you might search “total S&P 500 Index ETFs.” For growth ETFs, search “S&P 500 growth ETFs.”
Compare expense ratios: Expense ratios aren’t the only consideration when choosing an index ETF, but they should be at the top of the list.
Compare holdings: Some ETFs hold all the stocks in the index they track. Others might invest in a representative sample.
Compare performance: Look at the funds’ recent performance and their performance over three, five and 10 years to get the most accurate comparison.
How To Invest in S&P 500 ETFs
You can invest in ETFs yourself, through a self-directed investment account at a brokerage such as Vanguard, Fidelity or Schwab. You’ll be able to search a list of the ETFs your brokerage offers — or search a specific one if you already know which you want to invest in.
Once you’ve researched the options and selected the ETF you want to purchase, place an order by clicking a “Buy” or “Trade” button on the ETF’s listing on the brokerage site.
Final Take
The biggest S&P 500 ETFs mirror the performance of the underlying index — but many available variations offer opportunities to target specific niches within the index. However, they typically come with higher expense ratios and greater volatility, so it’s important to weigh the risks before you invest.
Daria Uhlig contributed to the reporting for this article.
Methodology: GOBankingRates reviewed expense ratio and performance data for S&P 500 ETFs, and selected those that compared most favorably. Data is accurate as of June 11, 2024, and is subject to change.
This article originally appeared on GOBankingRates.com: Best S&P 500 ETFs June 2024
