lowest cost s&p 500 index etf: a comprehensive guide

The S&P 500 index ETF is a popular investment option for those looking to track the performance of the US stock market.

It's also known as the "Wall Street index" or the "stock market index".

The S&P 500 index is a market-capitalization-weighted index of the 500 largest publicly traded companies in the US.

This means that the largest companies in the index have a greater influence on its performance.

Investing in an S&P 500 index ETF can provide broad diversification and potentially lower risk.

By tracking the S&P 500 index, an ETF can offer exposure to a wide range of industries and sectors.

Choosing the right ETF can be overwhelming, but IVV stands out for several reasons. It seeks to track the S&P 500 Index, which is based on the 500 largest U.S. stocks by market capitalization.

One of the key advantages of IVV is its efficiency. It has a low management fee combined with the tax efficiency of an ETF. This makes it a great option for long-term growth.

IVV is designed to be used as the core of your portfolio, allowing you to seek long-term growth.

Fees and costs are a crucial aspect to consider when investing in an S&P 500 index ETF. The management fee is a significant expense, ranging from 0.03% to 0.2% as seen in various funds.

A low expense ratio is essential for maximizing returns, as it directly affects the fund's performance. For instance, a fund with an expense ratio of 0.2% might have an annualized return that's 0.2% lower than the benchmark index.

The key difference between index funds is the cost, and experts advise investors to focus on this when comparing funds. A lower fee means more money can compound over time.

Here's a breakdown of the typical fees you might encounter:

These fees are subject to change and may not include extraordinary expenses incurred by the fund.

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Legendary investor Warren Buffett recommends index funds, notably a Standard & Poor's 500 index fund, to most investors. This is because index funds can offer attractive returns by reducing the fees you pay.

An index fund is a passive investment that tracks the assets included in the index, such as the Standard & Poor's 500 index, which includes about 500 of the largest publicly traded American companies.

To invest in low-cost index funds, you'll want to consider the index's long-term returns and the cost to own the index fund. The two most important things to know are the index's long-term returns and the cost to own the index fund.

At the heart of our investment approach are a few key principles that guide our decision-making. We value your trust and strive to provide readers with accurate and unbiased information.

Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you're reading is accurate.

We maintain a firewall between our advertisers and our editorial team. This means that our editorial team does not receive direct compensation from our advertisers.

Here are the key principles we follow:

Long-term returns are a crucial factor to consider when evaluating an investment. An index's long-term performance is a good gauge of how it might perform in the future, but it's not a guarantee.

Stock funds are likely to perform better long-term than bond funds, but bonds may outperform stocks over shorter time periods. During periods of rising interest rates, bond prices will fall.

The S&P 500 has returned about 10 percent annually over long periods of time, though it's done better than that over the last decade or so, averaging 12.6 percent from 2013 to 2022.

The Nasdaq Composite has shown an even better return over the past decade, putting up annual returns of over 13 percent from 2014 to September 2023.

Here are some notable long-term returns of popular indexes:

It's essential to note that past investment product performance is no guarantee of future price appreciation.

Tracking error is a measure of an index fund's effectiveness in replicating the performance of the benchmark index, such as the S&P 500. Research sites like Morningstar, Lipper, and Kiplinger can help you analyze this by showing how close the fund's historical performance has been to the target benchmark.

You can also use the expense ratio to gauge the fund's tracking error. If the returns are below the benchmark by roughly the same amount as the fund's expense ratio, the tracking error is close. For example, a 0.2% expense ratio might result in a 9.8% annualized return for an S&P 500 index mutual fund with a 10% annualized return.

Mutual fund families don't publicly display tracking error, so you'll need to rely on these indirect measures to get an idea of the fund's performance.

When analyzing the performance of a low-cost S&P 500 index ETF, it's essential to consider the tracking error, which measures how closely the fund's performance matches the benchmark index.

The tracking error can be a significant drawback, as mutual fund families often don't publicly display this information. However, research sites like Morningstar, Lipper, and Kiplinger provide data points to analyze performance tracking.

To gauge the tracking error, look for how close the historical performance of the fund has been to the target benchmark. If the returns are below the benchmark by roughly the same amount as the fund's expense ratio, the tracking error is close.

This means that a fund with a 0.05% expense ratio and returns 0.5% lower than the benchmark is likely to have a low tracking error.

Before investing in an S&P 500 index ETF, consider the transaction fees that may apply. Typical transaction fees range between $10 and $20.

Keep in mind that these fees can add up, especially if you're dollar-cost averaging by periodically purchasing shares. The expense ratio may be lower, but the trading fees can make the fund more expensive than other options.

To minimize costs, it's essential to choose a fund with low or no transaction fees.

Before investing in an index fund, consider the other fees involved. Trading costs can add up quickly, ranging from $10 to $20 per transaction.

You may already have an account with a broker like Vanguard, but that doesn't mean you won't be charged a transaction fee to buy a fund outside their family, like the Schwab S&P 500 Index.

Dollar-cost averaging can actually increase the expense ratio if you're buying shares periodically, which can be a costly mistake.

Some of the cheapest S&P 500 funds you can buy with $1,000 or less are listed online, but it's essential to do your research before making a decision.

Before investing, it's essential to understand how to buy the investments you're interested in. To buy an index fund, you'll need access to the markets through a brokerage.

You can use a standard brokerage account or a specialized retirement account with tax benefits. These accounts function much like bank accounts, but once you add money, you can invest it in assets such as stocks, bonds, and S&P 500 index funds.

Brokerages offer a platform to buy and sell investments, and some even offer mobile apps for easy access.

Before investing, it's essential to understand the numbers behind a fund's performance. If a fund has a high expense ratio, it may eat into your returns.

An expense ratio of 0.2% can seem small, but it can add up over time. The fund in question had a five-year annualized return of 10%, which is a respectable rate of growth.

However, if the benchmark return is higher, it can be a red flag. In this case, the benchmark return was 10.2%, which means the fund underperformed its peers.

Tracking error is a key metric to consider when evaluating a fund's performance. A precise tracking error can indicate that the fund is closely following the benchmark, but in this case, it's not entirely accurate.

If you're new to investing, you might be wondering what the difference is between a mutual fund and a mutual company. The answer lies in the fact that a mutual fund is a type of investment vehicle that pools money from investors to invest in a variety of assets.

A mutual fund can be either a passively managed index fund or an actively managed fund with managers who try to beat the market. This is in contrast to a mutual company, which is not mentioned in the article section.

Before investing in SPLG stock, it's essential to consider the opinions of Wall Street analysts.

A Moderate Buy consensus rating is assigned to SPLG, based on 399 Buys, 97 Holds, and 10 Sell ratings in the past three months.

The average stock price target of $60.34 suggests a significant upside potential of 14.2%.

This rating and target price can be a crucial factor in deciding whether or not to invest in SPLG stock.

One ETF that stands out for its low cost is the State Street S&P 500 Index Fund.

The fund has a net expense ratio of just 0.16%, which is a significant advantage for investors.

You can get started with a minimum initial investment of $1,000, making it accessible to those with a decent amount of capital.

The US has a vast array of ETFs to choose from, but some stand out as major players in the market. The SPDR S&P 500 ETF Trust (SPY) is one of the largest and most popular ETFs, with over $300 billion in assets under management.

The Vanguard Total Stock Market ETF (VTI) tracks the CRSP US Total Market Index and has over $200 billion in assets. It's a great option for investors looking for broad market exposure.

The Invesco QQQ ETF (QQQ) tracks the Nasdaq-100 Index, which is dominated by tech stocks like Apple and Microsoft. This ETF is a popular choice for tech enthusiasts.

The iShares Core S&P Total U.S. Stock Market ETF (ITOT) is another large ETF with over $50 billion in assets, offering a low-cost way to invest in the entire US stock market.

The Vanguard FTSE Developed Markets ETF (VEA) is a great option for investors looking to diversify their portfolio with international exposure, tracking the FTSE Developed All Cap ex US Index.

Vanguard 500 Index Fund Admiral Shares has a symbol of VFIAX and a net expense ratio of 0.04%. This is one of the lowest fees among S&P 500 index funds, making it a great option for those looking to save money on investment costs.

The minimum initial investment for Vanguard 500 Index Fund Admiral Shares is $3,000, which is a relatively high minimum investment requirement compared to some other index funds.

A difference in fees between 0.01% and 0.03% may not be significant, but differences of 0.05% or more between funds can make a significant difference in your wealth through your working years leading into retirement, as noted in the USAA S&P 500 Index Fund Member Shares example.

This low expense ratio can help your investment grow over time, making it a smart choice for long-term investors.