The Best S&P 500 ETF 2024: A Comprehensive Comparison of Top Performers

Anyone looking to invest in the world’s leading stock index faces a wide selection. The S&P 500, with its 500 largest publicly traded companies in the USA, offers a variety of ETF options. This guide helps you find the best S&P 500 ETF for your investment goals and highlights which criteria are crucial when choosing.

What makes an S&P 500 ETF the best in its class?

The S&P 500 Index is considered a seismograph of the American economy. The companies included come from a diverse range of industries, allowing investors broad diversification. However, not all S&P 500 ETFs are the same. Differences lie in details that can have significant long-term impacts on returns.

A best S&P 500 ETF is characterized primarily by low fees. Even differences of a few basis points can become quite noticeable over decades. Additionally, the replication method, tracking accuracy, and liquidity play roles. Tax efficiency is also an important criterion for long-term investors.

Physical versus synthetic replication

The way an ETF replicates the index influences both cost structure and risk profile:

Physically replicating ETFs:

• Actually hold all or a representative portion of the index stocks
• Offer higher transparency and asset protection
• May incur higher management costs
• Are less susceptible to counterparty risks

Synthetic replicating ETFs:

• Use derivatives to mimic index performance
• Often achieve more precise tracking results
• Tend to have lower expense ratios
• Carry a potential counterparty risk

The top five S&P 500 ETFs at a glance

SPY: The classic since 1993

The SPDR S&P 500 ETF is the pioneer among S&P 500 ETFs. Since its launch in 1993, SPY has become the most traded ETF of its kind worldwide. Managing hundreds of billions of euros in assets, it offers unmatched liquidity and extremely tight bid-ask spreads. Its close tracking of the index and decades-long track record make SPY the first choice for many investors.

IVV: Major asset manager with low fees

The iShares Core S&P 500 ETF launched in 2000 and has since become a preferred alternative for cost-conscious investors. IVV manages a substantial amount of assets and boasts one of the lowest expense ratios in its category. Its precise index tracking and high liquidity make it a top S&P 500 ETF for retail investors seeking to save on fees.

VOO: Vanguard’s answer to low-cost index investing

The Vanguard S&P 500 ETF started in 2010 and quickly established itself as a favored choice for fee-oriented investors. VOO combines extremely low costs with reliable index replication. Vanguard’s focus on cost-efficient passive index strategies is reflected in this product. For investors prioritizing minimal fee burden, VOO is a compelling candidate.

SWPPX: The independent route at Schwab

The Schwab S&P 500 Index Fund has been around since 1997, serving investors who want to invest through Schwab. SWPPX impresses with its passive index strategy and low fee structure. Especially for investors holding a comprehensive account at Schwab, this fund offers seamless integration.

RSP: The alternative weighting strategy

The Invesco S&P 500 Equal Weight ETF plays a special role. Instead of weighting by market capitalization—where mega-cap tech companies dominate—RSP assigns equal weight to all 500 holdings. This strategy, existing since 2003, allows for broader diversification and can lead to different performance characteristics. For investors seeking a different perspective on the US stock market, RSP offers an interesting option.

Sector-specific strategies within the S&P 500

The S&P 500 not only offers broad ETFs but also specialized sector instruments. These enable targeted bets on specific economic sectors:

XLK – Technology: Focuses on large tech giants like Apple, Microsoft, and Amazon. With an average return of 25.6% over 1 year and 124.5% over five years, this sector has shown the strongest performance.

XLV – Healthcare: Provides exposure to pharmaceutical companies, biotech firms, and healthcare providers. The 15.9% annual return indicates a more stable, less volatile development.

XLF – Financials: Tracks banks, insurance companies, and financial service providers, with a 20.3% annual return and solid long-term performance.

XLY – Consumer discretionary: Offers access to retail, media, and leisure companies. With a 23.8% annual return, this sector is highly sensitive to consumer trends.

XLE – Energy: Invests in oil, gas, and energy equipment companies. With a 13.2% annual return, this sector is significantly more volatile than others.

Performance overview of the main sectors:

Criteria for choosing your personally best S&P 500 ETF

The right ETF choice depends on individual factors:

Expense ratios: Carefully compare management fees. Even a 0.1% difference can have significant long-term effects over 30 years.

Tracking error: Check how accurately the ETF tracks the index. A low tracking error is desirable.

Liquidity and trading volume: ETFs with higher trading volumes allow for cheaper entry and exit.

Tax efficiency: Especially relevant for ETFs in taxable accounts. Distribution policies and rebalancing methods matter.

Personal investment goals: Whether you prioritize maximum cost efficiency, transparency, or alternative weighting concepts influences the best choice.

The historical context: How it all began

SPY marked a turning point in investment history in 1993. As the first exchange-traded fund to track a stock index, it revolutionized how retail investors build portfolios. Instead of selecting individual stocks or buying expensive actively managed funds, investors could now invest in 500 large companies with a single trade. This innovation laid the foundation for today’s diverse ETF landscape.

Conclusion: Finding the best S&P 500 ETF for yourself

S&P 500 ETFs offer a straightforward way to benefit from the growth of the American economy. The best S&P 500 ETF is not universally defined—rather, the optimal choice depends on individual requirements.

For investors valuing maximum liquidity and transparency, SPY is a proven choice. Cost-conscious investors will find attractive options in IVV and VOO. Alternative weighting strategies like RSP offer new perspectives. Sector-specific ETFs enable targeted positioning.

The combination of broad diversification, cost efficiency, and flexibility makes S&P 500 ETFs essential components of modern portfolios. With the right criteria, you can find the ETF that best fits each investment idea.