Best S&P 500 ETFs 2026: Low Fees & Top Picks
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Adheres to Unlock lasting wealth and simplify your investing with S&P 500 ETFs. This guide reveals the top funds like VOO and IVV, offering ultra-low fees and pr...
- Unbiased breakdown of America's 3 largest S&P 500 funds worth $2.3T
- Data-driven analysis shows which fund delivers better after-tax returns
- Find the lowest-cost ETF tracking 500 companies
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What Is An S&P 500 ETF?
An S&P 500 ETF is an investment fund that tracks the 500 largest U.S. companies. Think of it as buying a tiny piece of Apple, Microsoft, Amazon, and 497 other top companies with one simple purchase.
The S&P 500 represents about 80% of the total U.S. stock market value. These funds give you instant access to America's biggest winners without having to pick individual stocks by yourself.
Choosing the right S&P 500 ETF can save you thousands in fees over decades of investing. This guide will introduce you to the best S&P 500 ETFs available on the market in February 2026.
Key Facts About S&P 500 ETFs
The S&P 500 has delivered average 10% annual returns over 90 years
Three main ETFs control most of the market: VOO, IVV, and SPY with over $2.3 trillion combined
Expense ratios range from 0.03% to 0.0945% - small differences that cost thousands long-term
ETFs are more tax-efficient than mutual funds due to their unique structure
You can start investing with $1-5 through fractional shares at most brokers
The index includes 500 companies worth over $45 trillion combined
Dividends are paid quarterly and can be automatically reinvested for compound growth
No minimum investment required unlike many mutual funds that demand $1,000-3,000
Top 3 S&P 500 ETFs: Our Recommendations
Three ETFs dominate the S&P 500 space: VOO, IVV, and SPY. While they track the same 500 companies, they differ in costs and features that matter for your wallet, all of which is explained in more detail in the table below:
| ETF | Expense Ratio | Assets Under Management | Launch Year | Why It's Great | Best For |
|---|---|---|---|---|---|
| Vanguard S&P 500 ETF (VOO) | 0.03% | $865 billion | 2010 | Rock-bottom fees with Vanguard's shareholder-owned structure keeping costs low forever. Excellent tracking and tax efficiency. | Buy-and-hold investors who want maximum money working for them |
| iShares Core S&P 500 ETF (IVV) | 0.03% | $718.7 billion | 2000 | Matches VOO's ultra-low fees with BlackRock's institutional backing. Oldest of the low-cost options with proven tight tracking. | Investors who want low costs with BlackRock's reputation and stability |
| SPDR S&P 500 ETF (SPY) | 0.0945% | $716.8 billion | 1993 | The original S&P 500 ETF with highest trading volume and liquidity. Perfect for active trading but higher fees hurt long-term returns. | Active traders who need maximum liquidity, not long-term investors |
Why Expense Ratios Matter
Expense ratios might seem like tiny numbers, but they're actually one of the most important factors when choosing your S&P 500 ETF. These seemingly small percentage differences can cost you tens of thousands of dollars over decades of investing.
Want to see the full math breakdown and learn how to calculate the real cost of ETF fees on your specific situation? Read our comprehensive guide on ETF expense ratios and their long-term impact - it could save you thousands.
Tax Efficiency: A Key S&P 500 ETF Advantage
S&P 500 ETFs offer superior tax efficiency compared to traditional investment options, helping you keep more of your returns.
ETFs use a unique "in-kind redemption" process that minimizes taxable events. When large investors want to sell, they exchange ETF shares directly for the underlying stocks rather than forcing the fund to sell securities. This structure prevents unwanted capital gains distributions that could trigger tax bills.
This tax efficiency compounds over decades of investing. Every dollar you don't pay in unnecessary taxes stays invested and continues growing, potentially adding thousands to your long-term wealth.
How To Start Investing In S&P 500 ETFs
Getting started takes five simple steps, and you can begin with pocket change.
Choose Your Account Type
Taxable brokerage accounts offer maximum flexibility. Traditional IRAs give tax deductions now but you pay taxes later. Roth IRAs provide tax-free growth forever. 401(k)s often include employer matching - free money you can't ignore.
Pick A Broker
Schwab, Fidelity, E*TRADE, and most major brokers offer commission-free ETF trading https://www.schwab.com/pricing. Compare account minimums and features, but don't overthink it.
Start Small With Fractional Shares
Most brokers let you buy fractional shares starting at $1-5. Can't afford a full $400 VOO share? Buy $50 worth and own 12.5% of a share.
Automate With Dollar-Cost Averaging
Invest the same amount monthly regardless of market swings. When prices drop, you buy more shares. When they rise, you buy fewer. This smooths out volatility over time.
Pick One ETF And Stick With It
Don't buy multiple S&P 500 ETFs - they're nearly identical. Choose VOO or IVV for low costs, set up automatic monthly purchases, and let compound growth work its magic. The key is consistency, not complexity.
FAQs
Which S&P 500 ETF is best for beginners?
VOO or IVV are ideal for beginners due to their 0.03% expense ratios. Both track the same index with nearly identical performance, so pick either one and start investing consistently.
Can you lose money in S&P 500 ETFs?
Yes, you can lose money short-term. The S&P 500 fell 37% in 2008 and 18% in 2022. However, it has never lost money over any 20-year period in history, making it reliable for long-term wealth building.
How much should you invest monthly in S&P 500 ETFs?
Start with whatever you can afford, even $25-50 monthly. The key is consistency. Many financial advisors suggest investing 10-20% of your income, but begin small and increase over time as your income grows.
Do you need multiple S&P 500 ETFs?
No, one S&P 500 ETF is enough. They all track the same 500 companies, so buying multiple creates unnecessary overlap without additional diversification benefits.
When do S&P 500 ETFs pay dividends?
Most S&P 500 ETFs pay dividends quarterly, typically in March, June, September, and December. You can choose to receive cash payments or automatically reinvest dividends to buy more shares.
What's the minimum investment for S&P 500 ETFs?
With fractional shares, you can start with $1-5 at most brokers. There's no minimum investment requirement, making S&P 500 ETFs accessible to investors with any budget size.
Should you invest during market downturns?
Yes, market downturns offer buying opportunities. Dollar-cost averaging helps by automatically buying more shares when prices drop and fewer when they rise, potentially improving long-term returns.
How do you track S&P 500 ETF performance?
Compare your ETF's returns to the S&P 500 index itself. Good ETFs stay within 0.02% of the index's performance. Your broker's app or website shows performance data and comparisons.
Bottom Line: Choose Low Costs And Stay Consistent
The math is clear: VOO and IVV win for long-term investors with their 0.03% fees. SPY works for active traders but costs more over time. Choosing just one of these ETF gives you everything you need - don't overcomplicate it.
The S&P 500's 10% average annual returns over 90 years make it a proven wealth builder. Start today with whatever amount you can afford.
Consistency and low costs matter more than perfect timing. Even $25 monthly grows into serious money over decades thanks to compound growth. The best time to plant a tree was 20 years ago. The second best time is now.
When you are ready, Financer can help you choose the best broker for your S&P 500 investment. Compare all our lenders for no cost, no sign up, and 100% transparency.