Which Is the Best S&P 500 Index Mutual Fund or ETF for Investors Now?

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Investors have to be scratching their heads in 2017. After perhaps the most brutal election cycle of modern times, investors keep seeing the U.S. stock market challenge all-time highs almost every single day. The notion that this bull market is a few days shy of eight years old just doesn’t matter. Investors keep wanting to buy pullbacks, and they are looking for new ideas.

24/7 Wall St. has tracked many mutual funds and exchange traded funds (ETFs) for years. The granddaddy of all indexes is the S&P 500 Index with a combined market cap of a whopping $21.3 trillion. This index dwarfs the Dow Jones Industrial Average’s $5.97 trillion market cap.

Many investors simply do not want to take any non-market risk in specific stocks or even in specific sectors. That leads them into the S&P 500 mutual funds or ETFs. The question that many investors will ask is which S&P 500 Index fund is the best?

When it comes to be the best, let’s say that beauty is in the eye of the beholder. The three major funds/ETFs that track the S&P 500 all have incredibly low fees, less than 0.1%. That is dirt cheap, and most index-trackers will tell you that fee minimization will influence your returns more than anything else over time.

The S&P 500 is large enough that it gives a full spectrum of sectors, some of which are growth and some of which are value. It also comes with a dividend yield of about 2.4%, even when you consider that roughly 80 members of the S&P 500 pay no dividends at all.

The absolute low when the S&P 500 hit 666 in March of 2009 means that the S&P 500 has risen about 240% since the V-bottom of the market.

The Vanguard 500 Index Fund Admiral Shares (VFIAX) is said to be the industry’s first index fund for individual investors. Its minimum investment size for this class of shares is $10,000. This 500 Index Fund comes with an expense ratio of just 0.05%. To put that in context, a $1 million fund balance would see fees of just $500 per year. The Vanguard S&P 500 fund’s total net assets were $292.4 billion as of January 31, 2017.

The Fidelity 500 Index Fund (FUSEX) has a $2,500 minimum investment and it comes with an expense ratio of 0.09%. That would mean that a $1 million fee would pay just $900 in annual fees. The Fidelity version of the S&P 500 fund had $111.4 billion in assets as of January 31, 2017.

The SPDR S&P 500 ETF Trust (NYSEMKT: SPY) is the key exchange traded fund that tracks the price and yield performance of the S&P 500 Index. Its annual gross expense ratio is 0.0945%, or a $1 million balance would cost $945 in annual fees. This ETF had $231.8 billion in assets as of February 21, 2017, and this is the most liquid of all major ETFs with 77 million shares in average daily volume. As ETFs are bought during the day just like a stock, investors need to watch out for commission fees paid to their brokerage firm on top of the management fees.

The S&P 500 Index sectors are as follows: Consumer Cyclicals, Telecommunications Services, Industrials, Consumer Non-Cyclicals, Financials, Healthcare, Information Technology, Utilities, Materials, and Energy. On last look, the top 10 constituents accounted for 18.14% of the entire index weighting: Apple, Microsoft, Exxon Mobil, Johnson & Johnson, Berkshire Hathaway, JPMorgan Chase, Amazon, General Electric, Facebook and AT&T.

Another issue that matters about just these three S&P 500 Index funds is that they have a combined value of more than $635 billion.

When a fee is down to under 0.1%, the reality is that it just doesn’t make a difference to most investors. Most investors do not have $1 million in any single fund, so the difference here over management fees is probably going to boil down to what other research and information they get out of each fund management group.

At the end of January, S&P sent 24/7 Wall St. some data showing that the S&P’s 2016 price-to-earnings (P/E) ratio was 19.4, but that was a 17.4 P/E ratio based on expected 2017 earnings per share. S&P’s latest month-end data showed that there is over $7.8 trillion benchmarked to the S&P 500 Index, and the actual index assets were about $2.2 trillion in total — so just these three top funds and ETFs are close to one-third of the entire S&P 500 Index tracking values. They might even be more if you include their crossover funds.

Wednesday’s closing bell for the S&P 500 was 2,362.82 (−2.56). That is just two days down of the past 10 trading days.