What Is the S&P 500?
If you’re serious about building wealth over time, you need to meet your new best friend: The S&P 500.
The S&P 500 (short for Standard & Poor’s 500) is a collection of the 500 largest publicly traded companies in the United States. It includes big names you know—like Apple, Microsoft, Amazon, and Tesla—and hundreds more you might not think about but use every day (like Visa, Home Depot, and Johnson & Johnson).
When you invest in the S&P 500, you’re investing in a slice of the entire U.S. economy.
Why Famous Investors Like Warren Buffett Love the S&P 500
Warren Buffett—one of the richest and most successful investors ever—has said that most people should simply invest in an S&P 500 index fund and leave it alone. Here’s why:
- Diversification: You’re not betting on one company—you own a piece of 500 companies.
- Long-Term Growth: Historically, the S&P 500 has grown about 7–10% per year over the long run (after inflation).
- Simple and Low Cost: No need to pick individual stocks or time the market.
- Time-Tested: The S&P 500 includes companies that adapt, survive, and thrive over decades.
Buffett himself has instructed that 90% of the money he leaves behind should be invested in an S&P 500 fund for his family.
Warren Buffett’s Suggested Strategy for Most People
Buffett’s advice is simple:
- 90% of your investment portfolio in a low-cost S&P 500 index fund
- 10% in short-term government bonds (or, if you must, other investments that you understand and manage carefully)
Basically: Go heavy on the market as a whole. Skip the stress of stock picking. Play the long game.
This approach isn’t a guarantee, and investing always carries risk—but it’s a time-tested strategy built on patience and discipline, not hype.
How to Invest in the S&P 500
You can’t go out and buy the S&P 500 itself. But you can buy a fund that tracks the S&P 500.
There are two main types:
- Index Fund: A mutual fund designed to match the performance of the S&P 500. These typically are bought through traditional investment companies (like Vanguard or Fidelity). Index funds only trade once per day after the market closes.
- ETF (Exchange-Traded Fund): A fund that also tracks the S&P 500. Like Index Funds, these usually have very low fees. However, unlike Index Funds, ETFs can be bought and sold like a stock any time during the market day.
Both index funds and ETFs offer a way to own the 500 companies at once, without needing to buy them individually.
Popular S&P 500 ETFs and Index Funds
| Fund Name | Type | Provider | Ticker Symbol |
| Vanguard S&P 500 ETF | ETF | Vanguard | VOO |
| SPDR S&P 500 ETF Trust | ETF | State Street | SPY |
| Fidelity 500 Index Fund | Index | Fidelity | FXAIX |
These funds are designed to do one thing: mirror the performance of the S&P 500—giving you a piece of 500 major U.S. companies with just one investment. So when the S&P 500 goes up, these funds go up the same. When the S&P 500 goes down, these go down the same.
Why the S&P 500 Fits a Long-Term Plan
When you invest in the S&P 500, you’re betting that over time the U.S. economy grows, great companies continue to innovate, the world keeps moving forward.
You’re not trying to predict which company will be the next big thing—you’re investing in the idea that the future will be bigger than the present.
And history shows that over the long haul, betting on progress has paid off.