Best S&P 500 ETFs: 'Beating the benchmark is very difficult'
In the age of hedge funds and alternative assets, the S&P 500 Index is still considered the king of long-term investments. Before you fork over thousands of dollars on a professional portfolio manager, ask whether they have the chops to beat the S&P 500 in the long run.
In the majority of cases, they fail to do so.
According to recent market data, the S&P 500 has outperformed most actively managed U.S. large-cap funds for 14 consecutive years.
Anu Ganti, the head of U.S. index investment strategy at S&P Dow Jones Indices, reminded that “beating the benchmark is very difficult.”
Fortune Magazine observed that, over the past 10 years, only 27% of actively managed funds beat the S&P 500.
This is why famed billionaire investor Warren Buffett has long advocated for the use of index funds.
“In my view, for most people, the best thing to do is to own the S&P 500 index fund,” Buffett told Berkshire Hathaway’s annual meeting in 2020.
“The trick is not to pick the right company. The trick is to essentially buy all the big companies through the S&P 500 and to do it consistently and to do it in a very, very low-cost way,” Buffett explained.
He further said: “The record shows that the unmanaged index fund is going to do quite well over time and active investment as a group can’t beat it.”
Many finance professionals have echoed the Oracle of Omaha by cautioning investors against chasing expensive and complicated investment strategies. As Evercore strategist Julian Emanuel observed, complex strategies are less likely to outperform in a bull market.
“In a low-volatility, high-return environment like 2024, investors should stick to the basics —buying uncomplicated index funds, and active mutual funds with a proven track record of delivering alpha,” said Emanuel. “No need to complicate strategy. In simplicity there is beauty.”
Many analysts believe 2025 will be another bullish year for stocks. Dollar-cost averaging into S&P 500 index funds is highly advantageous for investors who are looking for a reliable way to grow their wealth.
In the ebb and flow of financial markets, the S&P 500 has a proven track record of strong historical returns over the long haul. For investors, this means they can rest easy during a market downturn, knowing they have exposure to one of the world’s best long-term investments.
Benefits of S&P 500 ETFs
Exchange-traded funds (ETFs) are one of the easiest and most cost-effective ways to invest in the S&P 500.
S&P ETFs are passive investment funds that track the large-cap index’s performance.
They’re “passive” because they’re designed to replicate the performance of the S&P 500 as closely as possible. Passive funds provide a hands-off approach to investing as they don’t require active management or constant trading.
Investing in these funds provides instant exposure to S&P 500 companies without the hassle of picking individual stocks. For this reason, S&P ETFs are highly advantageous for risk-averse investors with a long-term investment horizon.
Historically, investing passively in S&P 500 ETFs has provided strong returns, diversification across America’s largest companies and industries, and low costs.
By reinvesting dividends and allowing returns to compound over time, investors can quietly grow their wealth without the headaches.
Best S&P ETFs for 2025
| S&P 500 Index ETF | Issuer | Expense Ratio |
| SPDR S&P 500 ETF Trust (SPY) | State Street Advisors | 0.09% |
| iShares Core S&P 500 ETF (IVV) | BlackRock | 0.03% |
| Vanguard S&P 500 ETF (VOO) | Vanguard | 0.03% |
| Invesco S&P 500 UCITS ETF (SPXS) | Invesco | 0.05% |
| Technology Select Sector SPDR Fund (XLK | State Street | 0.09% |
There aren’t major differences between the leading S&P 500 ETFs. All track the benchmark index closely and have very low expense ratios, meaning they’re affordable and highly accessible.
However, some of the leading S&P 500 ETFs are more suitable for frequent traders while others are ideal for those who want to buy and hold for the long term.
The last one on the list—XLK—provides exposure to one particular sector of the S&P 500 rather than the entire index. This may be suitable for investors with a slightly higher risk tolerance.
SPDR S&P 500 ETF Trust (SPY)
Issued by State Street Global Advisors, the SPY ETF is the most popular of the bunch, with $616.1 billion in total assets under management. Based on the average daily value traded, it is also the most liquid.
According to State Street, SPY’s daily trading represents more than 85% of all S&P 500 ETF turnover, making it suitable for frequent traders. It also has the highest management fee on the list, with an expense ratio of 0.09%.
As one would expect, the SPY has closely mirrored the returns of the S&P 500 in recent years. The ETF returned 24.9% in 2024 and 26.2% in 2023.
iShares Core S&P 500 ETF (IVV)
BlackRock’s IVV is the second largest S&P 500 Index ETF, with total assets of roughly $582.2 billion. However, with an expense ratio of just 0.03%, it’s more cost-effective than the SPY.
When factoring expenses, liquidity, diversification benefits, and growth potential, IVV is a highly rated fund. It’s considered suitable for any investor who wants exposure to large-cap stocks.
IVV’s performance has closely mirrored that of the S&P 500, with annual gains of 24.9% and 23.3% in 2024 and 2023, respectively.
Vanguard S&P 500 ETF (VOO)
Vanguard’s VOO is another popular fund for investors looking to mirror the performance of the S&P 500. VOO has more than $1.35 billion in total assets under management, making it much smaller than SPY and IVV.
However, VOO’s low management fee (0.03%) makes it highly attractive to long-term investors who prioritize cost-efficiency over liquidity.
VOO has closely tracked the performance of the S&P 500, with returns of 25% in 2025 and 26.3% in 2023. Like the S&P 500, it had a down year of 18.2% in 2022.
Invesco S&P 500 UCITS ETF (SPXS)
SPXS is one of the best S&P 500 Index ETFs for European investors. The ETF is primarily listed on European exchanges but can also be accessed globally through select brokerages. The fund has $38.8 billion in total assets and a low management fee of just 0.05%.
The performance of SPXS closely mirrors that of the S&P 500 Index, with returns of 25.6% in 2024 and 27% in 2023.
Technology Select Sector SPDR Fund (XLK)
State Street’s XLK fund is a passively managed ETF that tracks the performance of the S&P 500’s Technology Sector Index. This means companies involved in technology hardware, communications, semiconductors, IT services, electronic equipment, and relatved areas.
XLK has $71.1 billion in assets under management and an expense ratio of 0.09%.
The ETF has 69 holdings as of Jan. 14, according to State Street. Its top-10 holdings include Apple, Nvidia, Microsoft, Broadcom, Salesforce, Oracle, Cisco Systems, Accenture, ServiceNow, and IBM.
The ETF returned 21.6% in 2024 and 56% in 2023—much higher than the broader S&P 500 Index. This largely has to do with the technology sector’s volatility. The sector has a tendency to exhibit a higher upside but also a sharper downside during a bear market.