Fidelity S&P 500 Index Fund (2023)

FAQs

Is it OK to only invest S&P 500 Index Fund? ›

The flawed “only invest in S&P 500” approach

However, this strategy is not bulletproof. Simply put, only investing in the S&P 500 is not a wise strategy for the long-term intelligent investor because it ignores some fundamental principles of diversification and historical unpredictability.

An S&P 500 index fund can be used for a high-conviction, long-term bet on U.S. large-cap stocks. Our recommendation for the best overall S&P 500 index fund is the Fidelity 500 Index Fund (FXAIX). With a 0.015% expense ratio, this fund is the cheapest one on our list.

It's also worth noting that an S&P 500 index fund is fairly diversified. Its investments are spread out among 11 major industries, and no sector has more than 30% of the money invested. Here's a look at the different business sectors that make up the index.

Can I invest all my stock-allocated money in the S&P 500? You can, but as I like to say, just because you can do something doesn't mean you should do it. As mentioned above, this index excludes the 25% smallest-cap US companies, and over the long haul, those have outperformed large-cap stocks.

You cannot directly invest in the index itself. You can buy individual stocks of companies in the S&P 500, or buy an S&P 500 index fund or ETF.

It tracked a hypothetical $10,000 investment in the S&P 500 stock index made on Jan 1, 1980 through the end of 2022. If the money was left untouched, the $10,000 invested in 1980 was worth $1.26 million at the end of 2022.

While Fidelity wins out overall, Vanguard is the best option for retirement savers. Its platform offers tools and education focused specifically on retirement planning.

On average, the Fidelity Contrafund has beaten the S&P 500 Index by 2.51% per year. Growth of $10,000 invested in Contrafund versus S&P 500 Index, September 17, 1990 to June 30, 2023. Total value June 30, 2023 for Contrafund was $572,541, compared to $274,153 for the S&P 500 Index.

As the innovator of index funds, Vanguard offers an impressive range of index funds today with low expense ratios. Fidelity has a comparable selection of funds, but its fees generally aren't as competitive as Vanguard's. That said, Fidelity does offer some zero-cost funds for its own customers.

Should I invest in S&P 500 every month? ›

How much can you earn over time? Despite its relative safety, the S&P 500 is also a powerhouse. Even small amounts of money -- invested consistently -- can go a long way over time. Historically, the index itself has earned an average annual return of around 10% per year.

Looking at the S&P 500 for the years 1993 to mid-2023, the average stock market return for the last 30 years is 9.90% (7.22% when adjusted for inflation). Some of this success can be attributed to the dot-com boom in the late 1990s (before the bust), which resulted in high return rates for five consecutive years.

It's extremely unlikely you'll earn 10% returns every single year, but the annual highs and lows have historically averaged out to roughly 10% per year over several decades. Over a lifetime, it's possible to earn over half a million dollars with just $100 per month.

Is Investing in the S&P 500 Less Risky Than Buying a Single Stock? Generally, yes. The S&P 500 is considered well-diversified by sector, which means it includes stocks in all major areas, including technology and consumer discretionary—meaning declines in some sectors may be offset by gains in other sectors.

Regardless of where you invest, it's wise to keep a long-term outlook. The market could be shaky over the coming months or even years. But if you invest in an S&P 500 ETF and hold that investment for at least a couple of decades, you're almost guaranteed to make money.

If you're new to investing, you can absolutely start off by buying index funds alone as you learn more about how to choose the right stocks. But as your knowledge grows, you may want to branch out and add different companies to your portfolio that you feel align well with your personal risk tolerance and goals.

Because actively managed funds often underperform the market, and index funds match it, passively managed index funds typically bring their investors better financial returns over the long term. Plus, they cost less, as management fees for actively managed investments tend to be higher.

The main drawback to the S&P 500 is that the index gives higher weights to companies with more market capitalization. The stock prices for Apple and Microsoft have a much greater influence on the index than a company with a lower market cap.

S&P 500 index funds offer a low-cost, low-risk way to invest in a representative array of major US companies. Though diversified, S&P 500 funds omit growth and foreign stocks, which can impact their gains.