Low Cost S&P 500 Index Funds: How to Compare Them

If you run an online store, freelance, or work from wherever the Wi-Fi is decent this month, you probably do not have time to pick stocks. An S&P 500 index fund is the simplest answer most people land on, and the real question is which one to buy. I put this together at Ecommerce Paradise so you can compare the popular options side by side using numbers pulled from the fund companies themselves, not from a roundup that copied somebody else’s table.

I have sold online since 2010, and business owners tend to put every spare dollar back into inventory and ads. That works until your whole net worth is tied to one store. An index fund is a way to own a slice of 500 large U.S. companies instead. If you are brand new to all of this, start with my guide on how to start investing and then come back here to pick a fund.

I cover what these funds own, the expense ratios and minimums I verified on the fund companies’ own pages, mutual fund versus ETF, taxes, and which account to use. There is also a short game plan you can finish in an afternoon. I do not rank the funds from best to worst, because the right pick depends on where your account lives and how you invest.

Disclosure: I am not a registered investment adviser, broker-dealer or financial advisor, and this article is education, not personalized financial advice. Ecommerce Paradise may earn a commission if you request offers through the partner tools on this page, at no extra cost to you. Investing involves risk, including the possible loss of principal, and past performance does not guarantee future results. Confirm tax and contribution rules with a qualified tax professional. Information in this article is current as of October 2026.

S&P 500 Index Funds at a Glance

Here are six widely held funds that track the S&P 500, with the cost and minimum figures I found on each company’s own documents. I sorted the table from lowest to highest expense ratio only because that is the one number that is easy to compare. It is not a ranking of which fund is better.

Fund	Type	Expense ratio	Minimum to start	Where I found it
Fidelity 500 Index Fund (FXAIX)	Mutual fund	0.015%	No purchase minimum	Fidelity summary prospectus dated April 29, 2026
Schwab S&P 500 Index Fund (SWPPX)	Mutual fund	0.02%	No minimum initial investment	Schwab Asset Management fund page, read October 12, 2026
Vanguard S&P 500 ETF (VOO)	ETF	0.03%	Price of a share (ask your broker about fractional shares)	Vanguard summary prospectus dated April 28, 2026
iShares Core S&P 500 ETF (IVV)	ETF	0.03%	Price of a share (ask your broker about fractional shares)	iShares fund page, read October 12, 2026
Vanguard 500 Index Fund Admiral Shares (VFIAX)	Mutual fund	0.04%	Generally $3,000	Vanguard summary prospectus dated April 28, 2026
SPDR S&P 500 ETF Trust (SPY)	ETF structured as a unit investment trust	0.0945% (gross of waivers)	Price of a share (ask your broker about fractional shares)	State Street fund page, data as of October 11, 2026

The primary documents behind those numbers start with the Fidelity 500 Index Fund summary prospectus. The Vanguard S&P 500 ETF summary prospectus covers VOO.

The Vanguard 500 Index Fund summary prospectus covers VFIAX. For IVV I used the iShares Core S&P 500 ETF page, which lists a 0.03% expense ratio as stated in the prospectus.

For SPY I used the State Street SPDR page, which lists a gross expense ratio of 0.0945%.

Fees and minimums change, so treat this table as a snapshot. Before you buy, open the fund’s current page or prospectus and confirm the numbers yourself.

Compare brokers and investing accounts that offer S&P 500 funds

What an S&P 500 Index Fund Actually Owns

The S&P 500 is an index maintained by S&P Dow Jones Indices. The index publisher describes it as including 500 leading U.S. companies and covering approximately 80% of available U.S. market capitalization. An index fund simply buys the stocks in that index in roughly the same proportions, so you own a piece of all of them with a single purchase.

The index is weighted by company size, which means the biggest companies have the biggest influence on how the fund moves. You do not get 500 equal slices. A relatively small number of very large companies can make up a large share of the fund, and that share changes over time. Every fund company publishes its current holdings, so look at the top holdings on the fund page before you buy and decide whether that mix is what you want.

The other thing to understand is that an S&P 500 fund is only U.S. large companies. It does not hold small companies, it does not hold bonds, and it does not hold foreign stocks. That is fine as a core holding, but it is one piece of a portfolio and not the whole thing.

Why Expense Ratio Matters, and Why It Matters Less Than You Think

The expense ratio is the percentage of a fund’s average net assets used each year to pay its operating expenses, according to the SEC investor education site Investor.gov. You never get a bill for it. It is taken out of the fund, which quietly lowers your return.

Here is a simple illustration with round numbers I picked for the arithmetic, not a forecast. Suppose you hold $10,000 in a fund for one year. At a 0.015% expense ratio the annual cost is $1.50. At 0.04% it is $4.00, and at 0.0945% it is $9.45.

On $100,000 those become $15, $40 and $94.50. This is only the arithmetic of the percentage, and it ignores investment returns.

The takeaway is that every fund in the table charges only a few hundredths of one percent a year. Investor.gov makes the same basic point in its bulletin on mutual fund and ETF fees: a fund with higher costs must perform better than a lower-cost fund to generate the same returns for you.

Between the funds in this table, though, the gap is a few dollars a year per $10,000. I would not lose sleep over 0.015% versus 0.03%. I would care much more about whether you invest every month, whether you panic and sell in a downturn, and whether you are paying extra trading fees or taxes because you picked the wrong account.

Mutual Fund or ETF?

Three of the six funds above are mutual funds and three are exchange-traded funds. They hold nearly the same stocks, but you buy and own them differently.

How ETFs Trade

The SEC’s Investor.gov bulletin on ETFs explains that ETF shares trade throughout the day on national stock exchanges at market prices. That market price can be a little above or below the fund’s net asset value per share, which is called a premium or a discount. For large, heavily traded funds like the S&P 500 ETFs the gap is usually small, but it is a real cost you should know about. You can read the details in the Investor.gov ETF bulletin.

ETFs also have a bid-ask spread, which is the gap between what buyers will pay and what sellers will accept. The same bulletin notes that more liquid ETFs with higher trading volume typically have tighter spreads. Vanguard’s own prospectus for VOO warns that you may pay costs tied to that spread and that the price you pay or receive is the prevailing market price.

How Mutual Funds Work

With a mutual fund like FXAIX, SWPPX or VFIAX you buy from the fund company at the fund’s net asset value rather than trading on an exchange, so there is no bid-ask spread to worry about. The trade-off is the minimum. Vanguard’s Admiral Shares generally require $3,000 to open, while the Fidelity and Schwab funds in my table list no minimum.

One more difference worth knowing is taxes. The Investor.gov ETF bulletin notes that ETFs often make fewer capital gain distributions than mutual funds. That matters mostly if you hold the fund in a regular taxable account. Inside an IRA or a solo 401(k) it makes no difference to your tax bill.

Which One Fits You

If your money is at Fidelity or Schwab and you want to automate monthly deposits in exact dollar amounts, the mutual funds from those companies are a natural fit because they have no stated purchase minimum. If your account is at a broker where you buy shares like stocks, an ETF is the easier route. Some brokers also offer fractional shares, so ask yours before assuming you need the full price of a share.

My comparison of the best online brokerages covers account features if you are still deciding where to open the account.

One practical warning. Some brokers charge a transaction fee or apply restrictions when you buy a mutual fund that belongs to another company’s family. I did not verify any broker’s fee schedule for this article, so check the fee page before you place the order.

Other Index Choices Beyond the S&P 500

If your goal is simply to own the U.S. stock market, the S&P 500 is not the only choice. A total market fund holds the large companies and also thousands of smaller ones. Vanguard’s Total Stock Market ETF (VTI) fact sheet lists a 0.03% expense ratio and 3,531 stocks as of June 30, 2026. The iShares Core S&P Total U.S. Stock Market ETF (ITOT) page lists a 0.03% net expense ratio and 2,457 holdings as of October 9, 2026.

The different holdings counts come from different index providers using different rules, so do not read them as a quality score. The practical point is that you can get a broader U.S. mix for about the same cost. The large companies in the S&P 500 still dominate either fund, so the two will often move similarly, but they are not identical.

For diversification outside the U.S., a fund like Vanguard’s Total International Stock ETF (VXUS) lists a 0.05% total expense ratio in its February 27, 2026 summary prospectus. That prospectus also warns about country and region risk and currency risk, which are risks you take on when you own foreign stocks.

If you want a gentler ride, a total bond fund like BND lists a 0.03% expense ratio in its April 28, 2026 summary prospectus, along with interest rate risk and credit risk. I go through how to combine these building blocks in my guide to the best ETFs for beginners.

Where to Hold Your S&P 500 Fund

The fund matters less than the account it sits in. As a store owner or freelancer you have more account options than a typical employee, because you can open retirement accounts built for self-employed people. The IRS lists a 2026 elective deferral limit of $24,500 for 401(k) plans, and the 2026 IRA limit is $7,500 according to the IRS announcement of 2026 retirement limits.

I compare the account types in detail in my guide to the best retirement accounts for business owners. My guide to the best IRA accounts covers the IRA side. The short version is that tax-advantaged accounts shelter dividends and growth from yearly taxes, while a regular brokerage account gives you flexibility to withdraw anytime. Many people use both. An S&P 500 fund works in either one.

If you are saving for something within a few years, like a house down payment or a tax bill, I would not put that money in stocks at all. Stock funds can fall in value, and you may not have time to wait for a recovery.

Taxes on Index Fund Dividends and Gains

In a taxable brokerage account, an S&P 500 fund can create two kinds of taxable events. The first is dividends passed through from the companies in the fund. The IRS explains in Topic 404 that dividends are ordinary income unless they qualify for the lower capital gain rates, and that mutual funds and ETFs pass along dividend income from the stocks they hold. You should receive a Form 1099-DIV from each payer that distributes at least $10.

The second is capital gains when you sell. The IRS says in Topic 409 that if you hold an asset more than one year, the gain or loss is long-term, and if you hold it one year or less, it is short-term and taxed as ordinary income. Long-term rates are lower for most people, so selling after more than a year is usually friendlier on taxes. Your own rate depends on your income, so ask a CPA.

Dividends are only part of what an S&P 500 fund can deliver. For reference, the iShares page for IVV shows a 30 Day SEC yield of 0.94% as of August 31, 2026. Yields move with markets, so treat that as one dated data point. If dividends are what you care about, my guide to the best dividend ETFs covers that angle.

The Risks Nobody Should Skip

An index fund is diversified across 500 companies, but it is still 100% stocks. Stock prices can fall sharply, and your fund will fall with them.

Past performance does not guarantee future results, and no fund company can promise you a return. If you need the money soon, or if a large drop would cause you to sell in a panic, a pure stock fund may be too aggressive for that part of your savings.

There is also concentration risk. Because the index is weighted by company size, a few giant companies have an outsized effect on the fund. If you also own your employer’s stock or run a business tied to the same sectors, you may be more exposed than you realize.

And there is the risk that has nothing to do with markets: behavior. The most common beginner mistake is checking the balance daily, getting nervous and then moving to cash after a drop. A boring plan you can stick with beats a clever plan you abandon.

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Investing With Irregular Self-Employed Income

If your income swings from month to month, a fixed monthly transfer can feel risky. Here is how I would think about it. First, set aside money for taxes and business expenses before you invest anything. Second, keep an emergency fund large enough to cover a slow stretch. Third, invest a smaller fixed amount every month you can, and add lump sums in strong months.

Keeping your business cash separate helps with all of this. A dedicated business account such as Mercury makes it easy to see what is left after expenses. Clean books from a tool like QuickBooks tell you what you can safely move to investing.

I also recommend investing only money that comes from a profitable business. If the income side is still the bottleneck, start with what high-ticket dropshipping is. Then work through the high-ticket niches list.

If you travel or live abroad, be aware that brokers set their own rules about which countries they accept and what documents they need to keep an account open. I did not verify any broker’s policy for this article, so confirm before you move money. A multi-currency account like Wise can help with the transfers themselves, and your tax obligations as a U.S. person do not disappear when you leave the country, so talk to a tax professional who handles expats.

Build the Business That Funds Your Investments

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A Simple Game Plan

Here is how I would put this into action without overthinking it. Step one is to decide which account you will use, whether that is an IRA, a solo 401(k) or a regular brokerage account. My guide to investing apps for beginners can help you compare platforms.

Step two is to pick one fund from a company that has an account type you can open easily, and compare the current expense ratio and minimum on the company’s own page. Step three is to set up automatic investing for an amount you can keep up even in a slow month. Step four is to ignore the daily noise and review once or twice a year, adding to the fund and rebalancing only if your plan calls for it.

If you want more structure around the business side of this, see my guide to finding dropshipping suppliers. The same goes for forming your business entity, because the entity you choose affects which retirement accounts you can open.

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Frequently Asked Questions

What is the best S&P 500 index fund?
There is no single best one. The funds in the table are all low-cost ways to track the same index, and the differences in expense ratio are small. Pick based on where your account is, whether you prefer a mutual fund or an ETF, and any minimum you must meet.

Is an ETF or a mutual fund better for an S&P 500 fund?
Neither is better in every case. ETFs trade during the day at market prices and often make fewer capital gain distributions, while mutual funds trade at net asset value once priced and let you invest exact dollar amounts. In a retirement account the tax difference does not matter.

How much money do I need to start?
It depends on the fund. According to the documents I read, FXAIX and SWPPX list no minimum, VFIAX generally requires $3,000, and ETFs require the price of a share unless your broker offers fractional shares.

Can I lose money in an S&P 500 index fund?
Yes. The fund holds stocks and its value moves with the market. Investing involves risk, including the possible loss of principal, and past performance does not guarantee future results.

Should I put all my money in one S&P 500 fund?
That is a personal decision, and I am not a financial advisor. The fund covers only large U.S. companies and holds no bonds or foreign stocks. Many people add other funds for diversification, and a licensed advisor can help you decide.

Pick a fund, automate it and get back to running your business. If you are still earlier in the journey, grab the free high-ticket dropshipping guide and build the income first.

More Guides in This Series

This is one of ten guides in my investing series for business owners and the self-employed, so here are the rest if you want to keep going.

How to Invest in Stocks: a beginner walkthrough of buying individual stocks.
Solo 401(k) vs SEP IRA: how the two self-employed retirement plans compare.
SEP IRA Contribution Limits: how much you can put into a SEP IRA.
Solo 401(k) Contribution Limits: the most you can contribute to a solo 401(k).
Best Dividend ETFs: dividend ETFs compared by cost, holdings and yield.
How to Start Day Trading: how day trading works, including the rules, taxes and risks.
Best Solo 401(k) Providers: what to look for when you pick a solo 401(k) provider.
Best ETFs for Beginners: ETFs that make sense as a starting point.

If you found this useful, these guides go deeper on related topics:

Trevor Fenner

Trevor Fenner is an ecommerce entrepreneur and the founder of Ecommerce Paradise, a platform focused on helping entrepreneurs build and scale profitable high-ticket ecommerce and dropshipping businesses. With over a decade of hands-on experience, Trevor specializes in high-ticket dropshipping strategy, niche and product selection, supplier recruiting and onboarding, Google & Bing Shopping ads, ecommerce SEO, and systems-driven automation and scaling. Through Ecommerce Paradise, he provides free education via in-depth guides like How to Start High-Ticket Dropshipping, advanced training through the High-Ticket Dropshipping Masterclass, and fully done-for-you turnkey ecommerce services for entrepreneurs who want a faster, more hands-off path to growth. Trevor is known for emphasizing sustainable, real-world ecommerce models over hype-driven tactics, helping store owners build scalable, sellable, and location-independent brands.