The S&P 500 has returned an average of 10.7% annually for the past 50 years. Warren Buffett recommends it. Jack Bogle built Vanguard on it. This guide explains why every American should own an S&P 500 index fund — and how to start.
What Is the S&P 500?
The S&P 500 tracks the 500 largest US publicly traded companies — Apple, Microsoft, Amazon, Google, Berkshire Hathaway. Buying one fund gives you instant diversification across all of them.
Historical Returns
| Period | Avg Annual Return | $10K Grew To |
|---|---|---|
| 10 years | ~12.8% | ~$33,500 |
| 20 years | ~9.8% | ~$64,000 |
| 30 years | ~10.2% | ~$187,000 |
| 50 years | ~10.7% | ~$1,540,000 |
Dollar Cost Averaging Power
$500/month for 30 years at 10% = $180,000 invested → ~$1,130,000 portfolio. Over 5x your money.
Best S&P 500 Funds
| Fund | Ticker | Expense Ratio |
|---|---|---|
| Fidelity 500 Index | FXAIX | 0.015% |
| Schwab S&P 500 | SWPPX | 0.02% |
| Vanguard 500 Index | VOO/VFIAX | 0.03% |
| iShares Core S&P 500 | IVV | 0.03% |
All track the same index. Pick the cheapest at your broker.
How to Start
- Open a brokerage account — Fidelity, Vanguard, Schwab, or inside a Roth IRA
- Choose ETF or mutual fund — functionally identical for buy-and-hold
- Set up automatic monthly investments — DCA on autopilot
- Do nothing — the hardest part. Do not sell during drops.
S&P 500 vs Individual Stocks
| Factor | S&P 500 Fund | Individual Stocks |
|---|---|---|
| Diversification | 500 companies | Limited |
| Risk | Market risk only | Company + market risk |
| Win Rate (20yr) | ~100% | ~25% beat index |
Common Mistakes
- Selling during crashes — every crash was followed by recovery
- Waiting for dips — time in market beats timing
- Not investing internationally — add international funds for diversification
See our investing roadmap and stock market guide.
🔑 Key Takeaways
- S&P 500: 10.7% average annual returns for 50 years
- $500/month for 30 years → over $1.1 million
- Lowest-cost funds: Fidelity (0.015%), Vanguard (0.03%)
- Automate and do nothing — simplest effective strategy
- Never lost money over any 20-year period in history
Frequently Asked Questions
How much to start?
$0 minimum. Fidelity offers fractional shares — buy $50 worth even if a share costs $500+.
Is it too late?
No. People have asked this for decades. The index keeps reaching new highs.
What if it crashes?
It will. Corrections happen annually, bear markets every 5-7 years. Each time it has recovered. Keep investing.
Is S&P 500 enough?
Great core holding. Add international index (20-30%) and bonds (based on age) for a complete portfolio.
