S&P 500 Index Funds for 2023: Which Fund Matches Your Investment Goals?

S&P 500 index funds have become a go-to choice for investors seeking broad market exposure through passive investing. These funds track the Standard & Poor’s 500, mirroring the performance of 500 major U.S. corporations. By investing in a 500 index fund, you gain instant diversification across tech, finance, healthcare, and other sectors without the hassle of picking individual stocks. The key appeal? Low fees and straightforward, hands-off portfolio building.

But with dozens of options available, selecting the right 500 index fund requires comparing specific metrics: expense ratios, minimum investments, historical performance, and assets under management. Let’s break down three standout choices and guide you through the selection process.

The Top Three 500 Index Funds: A Side-by-Side Comparison

The following funds represent some of the most cost-effective and accessible options for building S&P 500 exposure:

Fidelity 500 Index Fund (FXAIX): Maximum Affordability Meets Scale

FXAIX stands as one of the least expensive entry points into S&P 500 investing. Launched in 1988 with this particular share class beginning in 2011, the fund now oversees approximately $380 billion—a testament to its popularity among retail investors.

Why it appeals to cost-conscious investors: The expense ratio of 0.015% is among the market’s lowest, meaning minimal drag on your returns. There’s no minimum investment requirement, making it accessible whether you’re deploying $100 or $100,000. The fund constructs its portfolio by holding at least 80% in S&P 500 constituents while generating additional income through securities lending.

Performance track record: FXAIX carries a five-star Morningstar rating, having consistently matched or exceeded index performance. Fidelity’s broader reputation for staying competitive and responsive to investor needs adds credibility.

One consideration: While the fund itself dates to 1988, the current share class only started trading in 2011, which means its official track record spans roughly 12 years rather than 35. Some investors prefer longer historical performance data when evaluating funds.

Vanguard 500 Index Fund Admiral Shares (VFIAX): The Long-Term Pioneer

Vanguard created America’s first index mutual fund available to everyday investors and continues that legacy with VFIAX. Since launch in November 2000, Admiral Shares have accumulated over $289 billion in assets and a dedicated investor base.

What makes this fund distinctive: The Admiral Shares designation offers both a reduced expense ratio (0.04%) and a lower entry threshold ($3,000) compared to Vanguard’s standard S&P 500 offering. The 23-year operating history provides substantial data for evaluating long-term performance trends. Currently, the fund generates average annual returns around 7.16% since inception, though this varies annually.

Fee structure to note: Vanguard may charge a $20 annual account service fee on holdings under $1 million, though this is often waived depending on account activity or other Vanguard relationships.

Historical advantage: The extended track record appeals to investors who value proven, long-term consistency over newer alternatives.

Schwab S&P 500 Index Fund (SWPPX): The Two-Decade Alternative

SWPPX offers a middle-ground option with a 26-year history (since 1997) and straightforward structure. The fund manages approximately $66 billion in assets—smaller than the other two but still substantial enough to ensure efficient trading.

Cost efficiency factors: At 0.02%, the expense ratio sits between Fidelity’s ultra-low fee and Vanguard’s rate. Like FXAIX, there’s zero minimum investment. Schwab’s reputation as a premier index fund provider supports this offering.

Trade-off: The smaller asset base means less historical data and potentially fewer resources compared to Fidelity or Vanguard, though this rarely impacts actual fund performance.

How to Choose Your 500 Index Fund: Key Decision Points

Expense ratio matters more than you think: A fund charging 0.05% versus 0.015% may seem trivial, but over 30 years on a $50,000 investment growing at 10% annually, the fee difference compounds to thousands of dollars in forgone gains. Always compare this metric first.

Minimum investment: Who can get in? FXAIX and SWPPX welcome investors with any amount, while VFIAX’s $3,000 threshold might exclude some beginners. However, if you plan to make regular deposits, starting with $3,000 may feel manageable.

Historical performance consistency: Longer track records—like Vanguard’s 23 years—reveal how a fund performs across market cycles, bull runs, and downturns. Newer funds lack this perspective, though past performance doesn’t guarantee future results.

Assets under management: Funds with substantial AUM ($50 billion+) indicate investor confidence and ensure liquid, easy trading. Both FXAIX and VFIAX exceed this threshold comfortably.

Getting Started: Your Action Plan

Step 1: Open a brokerage account Choose an online broker (many offer zero-commission trading on these funds). Fidelity, Vanguard, Schwab, and others all provide straightforward account setup.

Step 2: Complete identity verification Standard requirements include Social Security number, income information, and contact details.

Step 3: Link and fund your account Connect your bank account and transfer your initial investment amount.

Step 4: Purchase your chosen fund Search by ticker (FXAIX, VFIAX, or SWPPX) and input your order size. You can also set up automatic monthly investments if preferred.

Step 5: Hold and reinvest Allow dividends to reinvest automatically (most platforms offer this) and maintain your position through market cycles.

Common Questions About 500 Index Funds

What returns should I expect? S&P 500 index funds historically average around 10% annualized returns, though results vary year to year. Markets may deliver 20%+ in strong years and negative returns in downturns.

Do these funds pay dividends? Yes. Companies in the S&P 500 distribute dividends, which the fund passes through to shareholders quarterly. Dividends contribute to total returns alongside share price appreciation.

How risky are 500 index funds? Investing always carries risk, but 500 index funds rank among the lower-risk options compared to individual stocks or sector-focused funds. Diversification across 500 companies and low fees reduce volatility and costs.

How long to double your money? Using the Rule of 72—dividing 72 by your average annual return—a 10% return suggests your investment doubles roughly every 7.2 years, though actual timelines depend on market conditions.

Final Recommendation

For most investors, FXAIX offers the best combination of ultra-low fees, zero minimums, and massive scale. VFIAX suits those who value Vanguard’s pioneer status and don’t mind the $3,000 entry. SWPPX represents a solid alternative if you prefer Schwab’s ecosystem.

Regardless of which 500 index fund you select, starting early and maintaining consistent investments through market ups and downs remains the most reliable path to long-term wealth building. The differences between these three funds are modest; the real advantage comes from choosing any of them and staying committed.