— -- Q: What's the least amount I can invest in the Standard & Poor's 500 index?
A: One of the biggest changes for individual investors is just how small they can be. You don't need much money, $200 or less, to invest to get started.
Just a few years ago, most mutual funds and brokerages required investors to bring a decent sum of money to the table just to get started. Minimum deposits of $500 if not $1,000 were pretty standard with even leading discount brokerages not long ago.
Investors with less money to start with face yet another hurdle: fees. Even if a brokerage charged just $15 for a trade, smaller investors could get chewed up in a hurry. Even a seemingly small $15 a trade commission can be pretty steep for an investor just looking to buy $50 or so of stock at a time.
Both of these hurdles to smaller investors, account minimums and commissions, continue to erode away. You'll just need to find a brokerage that offers accounts with no minimum balance that will allow you to invest in the S&P 500 with no or low trading fees.
You have several possibilities. If you're dead set on investing, literally, in the Standard & Poor's 500 one approach might be to open an account with a deep discount brokerage like TradeKing, ING Sharebuilder or Zecco and buy Vanguard's S&P 500 exchange-traded fund voo. Each of these low-cost brokerages allow investors to open accounts with no minimum deposit. You could then buy one share of the Vanguard S&P 500 exchange-traded fund for the current market price, currently about $60, plus a roughly $5 commission. You can own the S&P 500 for less than $70.
Keep in mind, with this approach you'll need to pay the commission each time you invest more money. The $5 a share commissions can add up over time. You will also need to pay the commission when you sell.
Another approach might be to sign up with a brokerage that has no account minimums and also offers free trading in an S&P 500 ETF. TD Ameritrade, for instance, has no account minimum. You can open an account and then buy and sell shares of the iShares S&P 500 ivv and pay no commission. The downside: the ETF has a higher per-share price of $130. Don't worry. You're still paying the same valuation for the S&P 500, it's just that the per share price is higher. With this technique, you have a higher entry price but won't have to worry about the ongoing commissions.
Other brokerages offer possible solutions, but have their own downsides. For instance, Scottrade offers an ETF that's like the S&P 500, called the Focus Morningstar Large Cap Index ETF flg, with a lower per-share price of $25 a share. However, Scottrade has a minimum deposit of $500. Similarly, Schwab offers an S&P 500-like ETF that trades for about $30 a share, but Schwab has an initial deposit of $1,000.
The bottom line is that if you have less than $200 to invest, then yes, you can buy into the S&P 500 or something very similar and still keep your costs very low. If any readers have any other suggestions, feel free to share them in the comments section below.
Matt Krantz is a financial markets reporter at USA TODAY and author of Investing Online for Dummies and Fundamental Analysis for Dummies. He answers a different reader question every weekday in his Ask Matt column at money.usatoday.com. To submit a question, e-mail Matt at mkrantz@usatoday.com. Follow Matt on Twitter at: twitter.com/mattkrantz
FAQs
You can't directly invest in the index itself, but you can buy individual stocks of S&P 500 companies, or buy a S&P 500 index fund through a mutual fund or ETF. The latter is ideal for beginner investors since they provide broad market exposure and diversification at a low cost.
Is there a minimum to invest in S&P 500? ›
If you are investing in an S&P 500 index fund:
If your index fund has no minimum, then you can usually purchase in any dollar amount. If your index fund has a minimum, then you have to purchase at least the minimum amount.
How do I invest directly into the S&P 500? ›
You can do so directly via online stock-trading platforms, such as TD Ameritrade, Fidelity, E-Trade and Betterment. Simply open a trading account with an online stock-trading platform by answering a few questions on your investment goals and investment risk tolerance, fund the account, and start buying stocks.
What would $100 invested in S&P 500? ›
The nominal return on investment of $100 is $26,588.47, or 26,588.47%. This means by 2023 you would have $26,688.47 in your pocket. However, it's important to take into account the effect of inflation when considering an investment and especially a long-term investment.
Should I just put my money in S&P 500? ›
Legendary investor Warren Buffet once said that all it takes to make money as an investor is to 'consistently buy an S&P 500 low-cost index fund. ' And academic research tends to agree that the S&P 500 is a good investment in the long term, despite occasional drawdowns.
Can you buy S&P 500 Wealth simple? ›
You can invest in multiple index funds, including the S&P 500, as easy as you can invest in a single index fund. Robo advisors generally offer portfolio rebalancing, which is a crucially important tool — and one you just don't get if you go it alone. Get a $50 cash bonus when you sign up to Wealthsimple Invest.
Is it smart to buy S&P 500? ›
As long as your time horizon is three to five years or longer, an S&P 500 index fund could be a good addition to your portfolio. However, any investment can produce poor returns if it's purchased at overvalued prices.
What is the average return of the S&P 500? ›
5-year, 10-year, 20-year and 30-year S&P 500 returns
| Period (start-of-year to end-of-2022) | Average annual S&P 500 return |
|---|
| 5 years (2018-2022) | 7.51% |
| 10 years (2013-2022) | 10.41% |
| 20 years (2003-2022) | 7.64% |
| 30 years (1993-2022) | 7.52% |
May 30, 2023
You can buy index funds through your brokerage account or directly from an index-fund provider, such as Fidelity. When you buy an index fund, you get a diversified selection of securities in one easy, low-cost investment.
What if I invested $1000 in S&P 500 10 years ago? ›
And if you had put $1,000 into the S&P 500 about a decade ago, the amount would have more than tripled to $3,217 as of April 20, according to CNBC's calculations.
Where does the RA formula see the S&P 500 index 10 years hence? The net 3.2% annual increase in share prices would mean the 500 hits 6000 in June of 2033, just 37% above its close of 4381 on June 22.
How much will my money grow in S&P 500? ›
Enter your expected rate of return. For a point of reference, the S&P 500 has a historical average annual total return of about 10%, not accounting for inflation. This doesn't mean you can expect 10% growth every year; you could experience a gain one year and a loss the next.
Why not put all your money in S&P 500? ›
It might actually lead to unwanted losses. Investors that only invest in the S&P 500 leave themselves exposed to numerous pitfalls: Investing only in the S&P 500 does not provide the broad diversification that minimizes risk. Economic downturns and bear markets can still deliver large losses.
How long should you leave money in S&P 500? ›
Regardless of where you invest, it's wise to keep a long-term outlook. The market could be shaky over the coming months or even years. But if you invest in an S&P 500 ETF and hold that investment for at least a couple of decades, you're almost guaranteed to make money.
What is S&P 500 downside? ›
The Invesco S&P 500® Downside Hedged ETF (Fund) is an actively managed exchange-traded fund (ETF) that seeks to achieve positive total returns in rising or falling markets that are not directly correlated to broad equity or fixed-income market returns.
What are the requirements for the S&P 500? ›
Over the past few years, there has been a decline in the number of S&P 500 companies with classified boards. Requirements to be added to the index include: Market capitalization must be greater than or equal to US$14.5 billion. Annual dollar value traded to float-adjusted market capitalization is greater than 0.75.
What is S&P 500 for beginners? ›
The S&P 500 is a stock market index that measures the performance of about 500 companies in the U.S. It includes companies across 11 sectors to offer a picture of the health of the U.S. stock market and the broader economy.
How much do you need to invest in S&P 500 to become a millionaire? ›
Data source: Author's calculations. As you can see from the chart, investing $5,000 annually in the S&P 500 would make you a millionaire in a little over 30 years, assuming average 10.25% annual returns.
How much money would I have if I invested in the S&P 500 in 2000? ›
Stock market returns since 2000
If you invested $100 in the S&P 500 at the beginning of 2000, you would have about $479.64 at the end of 2023, assuming you reinvested all dividends. This is a return on investment of 379.64%, or 6.90% per year.
