The S&P 500 index entered a bull market on June 8 after rebounding 20% from its October 2022 lows. For investors who believe the market will continue its winning streak, these four ETFs offer exposure to one of the most watched U.S. stock market benchmarks .
The iShares Core S&P 500 ETF, Vanguard S&P 500 ETF and SPDR Portfolio S&P 500 are tailored for investors looking for the lowest expense ratios. The SPDR S&P 500 ETF is best for investors and active traders who want the highest liquidity.
Key things
- The S&P 500 broke into a bull market in early June after falling 25% from record highs reached in December 2021.
- The iShares Core S&P 500 ETF, Vanguard S&P 500 ETF, SPDR Portfolio S&P 500 and SPDR S&P 500 ETF provide investors with exposure to the index.
- When choosing an S&P 500 ETF, investors should consider the fees they will pay and the liquidity of each fund.
- Apple Inc. (AAPL) is the largest company in the S&P 500 and thus the largest holding of each of these funds.
Investors they were encouraged by the decline in inflation and the Federal Reserve decision to suspend rate hikes at its June meeting. The S&P 500’s 12-month price-earnings ratio has fallen 11% over the past year, making many of these stocks cheaper.
Below, we take a closer look at four S&P 500 ETFs. We ruled it out leveraged ETFs, which provide excess returns but bring additional risk. All data below is as of June 14.
- Expense ratio: 0.03%
- Performance in one year: 15.4%
- Annual dividend yield: 1.56%
- 30-day average daily volume: 3,668,396
- Assets under management: $326.1 billion
- Start date: May 15, 2000
- Issuer: BlackRock Financial Management
- Expense ratio: 0.03%
- Performance in one year: 15.3%
- Annual dividend yield: 1.57%
- 30-day average daily volume: 3,590,357
- Assets under management: $312.6 billion
- Start date: September 7, 2010
- Issuer: Vanguard
- Expense ratio: 0.03%
- Performance in one year: 15.3%
- Annual dividend yield: 1.59%
- 30-day average daily volume: 3,191,321
- Assets under management: $18.3 billion
- Start date: November 8, 2005
- Issuer: State Street Global Advisors
Liquidity shows how easy it is to buy or sell an ETF, with higher liquidity generally translating into lower trading costs. While trading costs are not a concern for investors who hold ETFs for the long term, active traders prefer highly liquid funds to minimize costs.
- Expense ratio: 0.0945%
- Performance in one year: 15.3%
- Annual dividend yield: 1.60%
- 30-day average daily volume: 80,884,133
- Assets under management: $413 billion
- Start Date: January 22, 1993
- Issuer: State Street Global Advisors
Why the cost ratio matters
Because these ETFs track the performance of the S&P 500, one of the most important determinants of long-term returns is how much the fund charges in fees. ETF fees are measured by his cost ratiowhich is the percentage of the investor’s assets that the fund manager retains for the purpose of maintaining the fund.
A fund’s expense ratio can significantly affect the total returns of a long-term investor. An investor who puts $10,000 into a fund that returns 10% annually will pay $336 in fund fees with a 0.5% expense ratio. The same investor would pay $1,682 in fees if he put the same money in a fund with an expense ratio of 2.5%.
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As of this writing, the author does not own any of the ETFs listed above.