How to Invest in the S&P 500: A Beginner's Guide

When you hear investors talking about “the market” they’re most likely referring to the S&P 500.

That’s because the S&P 500 is a benchmark for the stock market as a whole - and many active investors use it as a measuring stick for their portfolio.

If you can choose stocks that outpace the S&P 500, some investors consider that “beating the market” - but what about if you’re a passive investor?

What if you want to just invest in the S&P 500 without all of the financial tracking, digging through data, and stock analysis?

Well, how to invest in the S&P 500 is actually pretty easy - and for the set-it-and-forget-it investors, it’s one of the most common routes.

In fact, many investors have solely invested in S&P 500 index funds or ETFs and have retired millionaires.

But, it takes time, patience, and the right mindset to make it happen.

Let’s break down how to invest in the S&P 500 - we’ll explain what the S&P is, the most popular routes, and how to develop an investor mindset (one of the most important parts).

But first: Our CEO Jaspreet Singh is hosting a free live investor workshop on March 18th where he’s breaking down how our market analysts identify market shifts and investing opportunities.

If you want to join, register here for free - act fast, as spots are limited.

What Is the S&P 500?

The S&P 500 is an index - which just means it's a basket of companies. Specifically, it tracks the 500 largest publicly traded companies in the United States by market capitalization.

Think Apple. Microsoft. Amazon. Nvidia. Alphabet (Google). Meta. 

These are all inside the S&P 500. 

And when you invest in the S&P 500, you're buying a tiny piece of all of them - across all 11 major sectors of the U.S. economy - in one single share.

That's the appeal. Instead of betting on one company, you're betting on the American economy as a whole.

Why the S&P 500 Can Be A Smart Starting Point For Some Investors

Most people think you have to find the next Apple or Amazon to build wealth in the stock market. 

The Truth: You don't.

Here's a simple example: if you invested $100 a month into an S&P 500 fund starting in your 20s and never stopped, you'd most likely retire a millionaire - based on the index's historical performance. 

That's not picking stocks. That's just showing up consistently.

The three factors that determine how wealthy you become as an investor are:

• Time - how long your money has to grow.
• Dollars - how much you invest.
• Return - how fast your money grows.

The S&P 500 takes care of the return side. 

Time and dollars? That's on you. 

And the earlier you start, the more time does the work.

How Do You Actually Buy the S&P 500?

You can't buy "the S&P 500" directly - it's an index, not a stock. 

What you can buy is a fund that tracks it.

There are two main types:

For most beginners, an ETF is the easiest entry point. It trades just like a stock, so you can buy it through any brokerage - Fidelity, Vanguard, Charles Schwab, and others all offer access.

The Three Most Popular S&P 500 ETFs

When it comes to S&P 500 ETFs, three names come up constantly: SPY, IVV, and VOO. Here's a quick breakdown (note - numbers as of Q2 2025):

All three track the S&P 500. All three hold the same core companies. The biggest practical difference is the expense ratio - the annual fee the fund charges you.

Here's why that matters: a 1% expense ratio can cost you up to 28% of your total investment value over a full investing career. 

That's because the fee compounds right alongside your returns.

With SPY, IVV, and VOO, fees are under 0.1%. 

Both IVV and VOO come in at 0.03% - meaning for every $1,000 you invest, you're paying 30 cents a year.

When two funds track the same index at a similar scale, lower fees usually win.

How to Pick a Fund: The CDAA Method

Before you invest in any fund, ask three questions:

1. Who created it? Start with large, reputable institutions. 

State Street, BlackRock, and Vanguard have trillions of dollars under management and decades of credibility.

2. What's in it? (CDAA)

• Companies - What are you getting exposure to? (All three above: the S&P 500)
• Dollars - How much money is in the fund? (Look for $1B+ minimum for lower typical volatility. SPY, IVV, and VOO each have hundreds of billions.)
  
• Asset Allocation - How is the money spread across holdings?

3. What does it cost? Check the expense ratio. For passively managed S&P 500 funds, anything under 0.1% is ideal.

Once you get really good at this, it takes about 10 minutes to analyze an ETF and saves you from costly mistakes.

The Strategy That Does the Heavy Lifting: Dollar Cost Averaging

Once you've picked your fund, you’ll need a strategy. 

A common strategy many investors use is dollar cost averaging (DCA).

Here's how it works: Instead of trying to time the market, you invest a fixed amount - say, $100 or $500 - on a regular schedule. 

Every week, every two weeks, or every month.

When the market is up, your $100 buys fewer shares. 

When the market is down, your $100 buys more. 

Over time, you're buying at an average price - and you're building wealth on autopilot.

For example: let's say you invest $100 every month into an S&P 500 ETF.

• In July, the market is high → you buy fewer shares.
  
• In August, the market dips → you buy more shares.

Over time, volatility works in your favor.

The real power of DCA? It removes emotion from investing. You're not sitting there wondering "is now the right time?" 

You've made the decision once, and then it executes itself.

Most brokerage platforms let you set up automatic investments in minutes.

The Mindset That Makes or Breaks Everything

Here's where most beginners go wrong: they treat investing like a short-term game.

97% of day traders lose money in the long run. 

Active traders underperform the market by 6.5% on average. 

Trying to time the market almost always backfires - because the best days and worst days often cluster together, and missing even the 10 best days in a decade can devastate your returns.

The phrase "time in the market beats timing the market" exists for a reason.

When you invest in the S&P 500 through a low-cost ETF and use DCA, you're not trying to win by being clever. 

You're winning by being consistent. You're letting the American economy do the work for you over 10, 20, or 30 years.

That patience is the edge.

But keep in mind: If your goal is to outpace the market (meaning the S&P 500) by investing in an S&P 500 index fund or etf, that’s not really possible.

Why? Because this passive investing strategy is simply matching the market.

If you always match the market, you’ll never beat it.

So, always consider your investing goals, risk tolerance, and timer horizon when investing.

As you become a more advanced investor, you may decide to combine active and passive investing.

How To Invest In The S&P 500: Final Thoughts

Investing in the S&P 500 is a simple passive investing strategy that works for many investors.

Some investors like the set-it-and-forget-it style - while others prefer to pick their own stocks.

In the end, how to invest in the S&P 500 is simple, 

• Choose a low-cost ETF or fund.
• Do your research.
• Pick a strategy that allows you to invest on autopilot.

Then, just let time, money, and patience do their thing for however you’d like to invest.

If you want to actually outpace the market though, you’ll need a strategy.

Our CEO Jaspreet Singh is hosting a free investor workshop on March 18th that explains how you can spot market shifts and potential investing opportunities before the rest of the market.

Save your spot by clicking here.