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The S&P 500 Index entered a bull market on June 8 after recovering 20% from its October 2022 lows. For investors confident that the market will continue its winning streak, these four ETFs offer exposure to one of the US stock market's most closely followed benchmarks.
iShares Core S&P 500 ETF, Vanguard S&P 500 ETF and SPDR Portfolio S&P 500 are tailored for investors seeking the lowest expense ratios. The SPDR S&P 500 ETF is best suited for investors and active traders who want the most liquidity.
The central theses
- The S&P 500 index broke into the bull market in early June after falling 25% from record highs set in December 2021.
- iShares Core S&P 500 ETF, Vanguard S&P 500 ETF, SPDR Portfolio S&P 500 and SPDR S&P 500 ETF offer investors exposure to the index.
- When choosing an S&P 500 ETF, investors should consider the fees payable and the liquidity of each fund.
- Apple Inc. (AAPL) is the largest company in the S&P 500, making it the top performer for each of these funds.
Investors were encouraged by falling inflation and the Federal Reserve's decision to suspend interest rate hikes at its June meeting. The 12-month price-to-earnings ratio for the S&P 500 is down 11% over the past year, making many of these stocks cheaper.
Below we take a closer look at four S&P 500 ETFs. We excluded leveraged ETFs, which offer above-average returns but come with additional risk. All dates below are as of June 14th.
- Expense ratio: 0.03%
- Performance over one year: 15.4%
- Annual Dividend Yield: 1.56%
- Average daily volume over 30 days: 3,668,396
- Assets under management: $326.1 billion
- Date of incorporation: May 15, 2000
- Issuer: BlackRock Financial Management
- Expense ratio: 0.03%
- Performance over one year: 15.3%
- Annual Dividend Yield: 1.57%
- Average daily volume over 30 days: 3,590,357
- Assets under management: $312.6 billion
- Date of incorporation: September 7, 2010
- Issuer: Vanguard
- Expense ratio: 0.03%
- Performance over one year: 15.3%
- Annual Dividend Yield: 1.59%
- Average daily volume over 30 days: 3,191,321
- Assets under management: $18.3 billion
- Date of incorporation: November 8, 2005
- Issuer: State Street Global Advisors
Liquidity indicates how easy it is to buy or sell an ETF, with higher liquidity generally resulting in lower trading costs. While trading costs are not an issue for investors who hold ETFs for the long term, active traders prefer highly liquid funds to minimize costs.
- Expense ratio: 0.0945%
- Performance over one year: 15.3%
- Annual Dividend Yield: 1.60%
- Average daily volume over 30 days: 80,884,133
- Assets under management: $413 billion
- Date of incorporation: January 22, 1993
- Issuer: State Street Global Advisors
Why expense ratios matter
Because these ETFs track the performance of the S&P 500 index, one of the most important determinants of long-term returns is the level of fees a fund charges. An ETF's fees are measured by its expense ratio. This is the percentage of an investor's wealth that the fund manager keeps to maintain the fund.
A fund's expense ratio can significantly impact a long-term investor's total return. An investor who puts $10,000 into a fund that produces a 10% return each year is paying $336 in fees to a fund with an expense ratio of 0.5%. The same investor would pay $1,682 in fees if they invested the same money in a fund with an expense ratio of 2.5%.
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At the time of writing this article, the author does not own any of the above ETFs.
