Which S&P 500 ETF is the best? The complete comparison for 2024

Quick Start: Why the S&P 500 is the Right Index for Your Portfolio

The S&P 500 Index represents the 500 largest publicly traded companies in the United States and forms the core of many successful investment strategies. Investing in this index allows for broad diversification across different industries and company sizes. Exchange-Traded Funds (ETFs) enable individual investors to participate in this development with minimal effort. Unlike buying individual stocks, they save time, reduce fees, and significantly lower the risk associated with single securities.

The key to success lies in choosing the right ETF. With dozens of products on the market, the central question is: Which S&P 500 ETF is the best for my situation? The answer depends on personal priorities—be it minimal costs, maximum transparency, or specific weighting methods.

The Five Market Leaders in Detail: An Overview of the Most Established Products

SPY: The Classic Since 1993

The SPDR S&P 500 ETF (SPY) was a pioneer in the industry and remains one of the most traded funds worldwide. Since its introduction over three decades ago, SPY has proven to be a stable foundation for US equity exposure. With a portfolio comprising all 500 index members, the fund offers solid tracking and excellent tradability. Its comprehensive liquidity makes SPY especially attractive for traders and investors with large positions.

IVV and VOO: The Efficiency Champions

The iShares Core S&P 500 ETF (IVV) has managed assets worth billions since its founding in 2000, making it one of the largest products of its kind. Aggressive cost management and precise index replication make it a top choice for cost-conscious savers.

The Vanguard S&P 500 ETF (VOO) launched in 2010 and has since established itself as a guarantee of economic efficiency. With structural cost advantages and years of outperformance, VOO proves that newer products can compete with established rivals. Many financial advisors recommend VOO as a standard component for long-term wealth building.

SWPPX: The Savings Plan Alternative

The Schwab S&P 500 Index Fund (SWPPX) targets investors who want to invest small to medium amounts regularly. Since 1997, SWPPX has demonstrated that cost efficiency and customer friendliness go hand in hand. Its structure as an investment fund (instead of an ETF) makes it particularly suitable for savings plans.

RSP: The Balance Strategy

While most ETFs weight their holdings by market capitalization—meaning Apple and Microsoft dominate—the Invesco S&P 500 Equal Weight ETF (RSP) weights all 500 companies equally. Since 2003, RSP has pursued an alternative approach that gives more weight to smaller and mid-sized companies. For investors skeptical of traditional capital weighting, RSP offers an interesting diversification opportunity.

Replication Method: Physical versus Synthetic

The choice of replication method is a frequently overlooked but crucial criterion when purchasing an ETF.

Physical replication means the fund actually buys the stocks included in the index. This offers maximum transparency—you know exactly what is in the portfolio—and minimizes counterparty risks. However, transaction costs and reinvestment efforts for dividends can subtly increase the total expense ratio.

Synthetic replication uses derivatives and swaps to mimic the index performance. The advantage: these funds can theoretically operate more efficiently and charge lower fees. The downside is increased counterparty risk—if the swap counterparty fails, potential losses can occur. This method is also more difficult for individual investors to understand.

Most of the major providers mentioned here—iShares, Vanguard, Schwab—use physical replication. This transparency makes them especially attractive for conservative savers.

Sector Focus: Targeted Action within the S&P 500

For those who want to invest broadly but also build targeted positions, sector-specific S&P 500 ETFs are available:

Technology (XLK): This fund focuses on tech giants like Apple, Microsoft, and Amazon. With an average 1-year return of 25.6% and a 5-year return of 124.5%, the technology sector appears particularly dynamic.

Healthcare (XLV): Pharmaceuticals, biotech firms, and healthcare service providers form the backbone of this fund. The more stable 1-year return of 15.9% and 5-year performance of 85.3% highlight the defensive nature of the sector.

Financials (XLF): Banks, insurance companies, and financial service providers account for nearly one-fifth of the S&P 500. With a 1-year return of 20.3% and 98.6% over five years, the financial sector lies between the extremes.

Consumer Goods & Retail (XLY): From Walmart to entertainment giants—this sector reacts directly to consumer trends. 23.8% last year and 105.4% over five years show robust demand.

Energy (XLE): The volatile energy sector exhibits the largest fluctuations. With only 13.2% 1-year and 17.9% 5-year returns, energy remains cyclical and riskier.

Practical Selection Criteria: How to Make the Best Decision

When comparing different S&P 500 ETFs, systematically evaluate the following factors:

Expense Ratios: The total expense ratio (TER) varies only by tenths of a percentage point among leading providers but adds up over decades to significant amounts. It pays to look this up.

Tracking Error: Measures the deviation between ETF performance and index performance. A value close to zero indicates precise tracking.

Liquidity and Bid-Ask Spreads: The higher the average trading volume, the narrower the bid-ask spreads. This saves real money when buying and selling.

Tax Efficiency: In taxable accounts, differences in handling dividends and rebalancing can be measurable. ETFs are generally superior to mutual funds here.

Custody Method: Check whether the ETF is stored in a securities special fund—this is the best protection against issuer insolvency risks.

History and Market Position: From Pioneer Era to Today

The first S&P 500 ETF was the SPDR S&P 500 Fund, launched in 1993. This introduction marked a turning point: for the first time, individual investors could buy into a large index with a single purchase. Previously, such exposure was only possible through actively managed mutual funds, which charged significantly higher fees.

This innovation opened an entire industry. Today, hundreds of ETFs exist worldwide, but S&P 500 ETFs remain the foundation of most investment portfolios. The fact that SPY, IVV, and VOO together manage over 500 billion dollars underscores their importance.

Conclusion: Which S&P 500 ETF Fits You?

There is no single “best” S&P 500 ETF—only the best for your personal situation. Beginners with small savings plans benefit from SWPPX, active traders from SPY, and efficiency-focused investors from VOO or IVV. Alternative weightings like RSP appeal to investors who want to deviate from the classic capital-weighted paradigm.

Regardless of your choice: a consistent savings plan investment in the S&P 500—via whichever ETF—remains one of the proven strategies for long-term wealth accumulation. The historical performance of the S&P 500 shows that the largest US companies perform convincingly over the long term. With a well-chosen ETF, you gain access to this proven success model—cost-effective, transparent, and straightforward.