How to Invest in the S&P 500
By Brittany St. Julian · SB Advisors Academy · Published April 5, 2026
Step by step guide to investing in the S&P 500 through index funds and ETFs. What it is, why it matters, and how to start.
How much money do I need to invest in the S&P 500?
You can start with $1 at most major brokerages thanks to fractional shares. ETFs like VOO and SPLG, and mutual funds like FXAIX, all support small recurring contributions. Consistency matters far more than starting size.
What is the best S&P 500 index fund for beginners?
VOO from Vanguard, SPLG from State Street, IVV from iShares, and FXAIX from Fidelity are all excellent low cost options. All track the same index. Pick the one available in your brokerage with the lowest expense ratio.
What is the average return of the S&P 500?
The S&P 500 has returned roughly 10 percent per year on average over long periods, or about 7 percent after adjusting for inflation. Individual years vary wildly, with positive years averaging 17 percent and negative years averaging negative 16 percent. The average emerges only over long horizons.
Is the S&P 500 a safe investment for beginners?
Over horizons of 10 years or more, the S&P 500 has historically been one of the safest broad equity investments because of how diversified it is across 500 leading companies. Over short horizons, it carries real volatility and can drop 20 percent or more in a year. Match your timeline to that reality.
Can I lose all my money in the S&P 500?
Practically, no. For all 500 of the largest US companies to go to zero simultaneously would imply a collapse of the entire US economy. The fund can lose significant value in a downturn, but total loss requires a scenario where the dollar itself is worth nothing.
What Is the S&P 500?
The S&P 500 is an index of 500 of the largest publicly traded companies in the United States. Together they represent roughly 80 percent of the total US stock market value. When you hear the market was up or down on the news, the S&P 500 is usually the index they are talking about. The index itself is not something you can buy directly. You buy a fund that mirrors it.
Why the S&P 500 Is the Most Recommended Beginner Investment
Decades of data show that a low cost S&P 500 index fund outperforms the majority of professional active fund managers over 10 plus year horizons. It gives you instant diversification across the largest companies in the US, costs almost nothing to own, and requires zero ongoing research. Warren Buffett famously instructed his trustees to put his estate into a low cost S&P 500 index fund. The reasoning that applies to him applies to a beginner with $50 a month.
What Is an S&P 500 Index Fund or ETF?
An S&P 500 index fund is a fund that holds shares of all 500 companies in the index in the same proportions. ETF (exchange traded fund) versions trade like a stock throughout the day. Mutual fund versions trade once per day at market close. Both deliver essentially identical performance. ETFs are usually preferred for taxable accounts. Mutual funds are common in 401k plans.
How to Buy S&P 500 Index Funds Step by Step
Open a brokerage account with Fidelity, Schwab, or Vanguard. Fund the account by linking your bank. In the search bar, type a ticker symbol such as VOO, SPLG, IVV, or FXAIX. Enter the dollar amount you want to invest. Confirm the order. The trade settles within one to two business days, and you officially own a slice of the 500 largest US companies.
How Much Do You Need to Start?
Most brokerages now allow fractional share purchases starting at $1. Practically, $25 to $100 a month on a recurring schedule is enough to make the math meaningful over a decade. A 25 year old investing $100 a month in an S&P 500 fund, assuming a 7 percent real return, would have roughly $240,000 by age 65 from contributions of just $48,000.
The Power of Dollar Cost Averaging Into the S&P 500
Dollar cost averaging means investing a fixed amount on a fixed schedule regardless of market price. Some months you buy at higher prices. Some months you buy at lower prices. Over time, the average price you pay smooths out, and you remove the emotional trap of trying to time the market. Set up an automatic monthly purchase and the strategy runs itself.
S&P 500 Historical Returns (What Beginners Should Know)
The long term average annual return of the S&P 500 is approximately 10 percent nominal, roughly 7 percent after inflation. Inside that average are years of plus 30 percent and years of minus 30 percent. Beginners who only see the average and not the swings tend to panic and sell in the first downturn. Knowing the swings exist before they happen is most of the protection.
How to Invest in the S&P 500 for Beginners | SB Advisors Academy
The S&P 500 is the most beginner friendly investing strategy in history. Learn what it is, how to buy it, and why most financial experts recommend it as a first investment.