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Best S&P 500 ETFs to Buy In 2021

Exchange-traded funds (ETFs) allow investors to own various stocks without directly buying the individual stocks. One of the main advantages of ETFs is that they enable retail investors to have a diversified portfolio with a little capital, which is why the instrument is appealing to beginner investors. 

Many ETFs are designed to track the S&P 500 Index, giving investors the opportunity to benefit from the movement of the broad market index. In this post, we have compiled a list of the best S&P 500 ETFs to trade in 2021.

What is an S&P 500 ETF?

An exchange-traded fund (ETF) is a basket of securities that are offered by investment firms as a single unit and traded on the stock exchanges all through the trading day, just like stocks. While an ETF portfolio can be actively selected, many are designed to mimic the components of a particular market index, and an S&P 500 ETF is one of such. An S&P 500 ETF tracks the S&P 500 Index, replicating its price action.

Over time, the index's composition may change, as promising companies are added and less performing ones removed, and the fund managers will adjust the composition of the ETF accordingly. At the moment, there are about 15 S&P 500 ETFs with total assets under management valued at $739.46bn.

Invest in S&P 500 ETFs in 3 steps

1

Choose the S&P 500 ETFs to trade

ETFs normally disclose their holdings almost daily, which presents an avenue through which you can evaluate and select your preferred S&P 500 ETF based on several criteria: returns, growth, weight, etc. Investors start by looking for ETFs in sectors they are interested in and then use the afore-mentioned parameters to select an appropriate ETF.

2

Open a trading account

When you have chosen the ETFs to trade, you can directly open a trading account with the firms that created the S&P 500 ETFs, which is cheaper, but you have to open an account with different firms if you chose more than one ETF. Alternatively, you may open an account with a broker, and there are a variety of online brokers that offer ETF trading. However, the trading charges may be higher.

3

Place your trade

After you have opened a trading account, you can start trading. You simply place your buy orders via an online platform provided by the Fund or your broker, as the case may be, at any time during the trading day.

Where can I trade S&P 500 ETFs?

S&P 500 ETFs are publicly traded on exchanges of the US stock market. This means that they are accessible to all traders and investors. You may choose to seek the services of a professional broker. Alternatively, you may decide to conduct due diligence and invest directly in S&P 500 ETFs of your choice after thorough analysis. However, brokers are usually the best place to trade. We’ve shortlisted our top 3 selected brokers on the table displayed below.

1
Min. Deposit
$1
Exclusive promotion
Our score
10
0 Commissions and no deposit minimums
Registered with and regulated by SEC and FINRA
Loss of cash protection
Start trading
Pros:
0 Commissions and no deposit minimums
Registered with and regulated by SEC and FINRA
Loss of cash protection
Payment methods
Full regulations list:
2
Min. Deposit
$250
Exclusive promotion
Our score
9.3
CFTC Regulated exchange based in the US
Trade around the clock, how you want, when you want
100% defined risk trades on Forex, Stock Index Futures and Commodities underlying markets
Start trading
Pros:
CFTC Regulated exchange based in the US
Trade around the clock, how you want, when you want
100% defined risk trades on Forex, Stock Index Futures and Commodities underlying markets
Payment methods
ACH, Debit Card, Wire Transfer
Full regulations list:
CFTC
Trading on Nadex involves financial risk and may not be appropriate for all investors.
3
Min. Deposit
$50
Exclusive promotion
Our score
8.7
Access over 220 of the most popular company shares
Trade on spreads from 1 pt on UK shares
Go long or short on global top companies
Start trading
Pros:
Access over 220 of the most popular company shares
Trade on spreads from 1 pt on UK shares
Go long or short on global top companies
Payment methods
Debit Card, Bank Wire, ACH, Credit Card, PayPal
Full regulations list:
NFA, CFTC, FCA, FSA, IIROC, CIMA, FFA Japan, MAS, SFC of Hong Kong
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Best S&P 500 ETFs to buy now

Based on parameters, such as asset under management, returns, historical records, and market acceptance, here are the top 10 S&P 500 ETFs:

  1. Vanguard S&P 500 ETF (VOO)
  2. SPDR S&P 500 ETF Trust (SPY)
  3. iShares Core S&P 500 ETF (IVV)
  4. iShares S&P 500 Growth ETF (IVW).
  5. SPDR Portfolio S&P 500 ETF (SPLG)
  6. ProShares Ultra S&P 500 (SSO)
  7. ProShares UltraPro S&P500 (UPRO)
  8. Direxion Daily S&P 500 Bull 3X Shares (SPXL)
  9. ProShares UltraPro Short S&P500 (SPXU)
  10. Direxion Daily S&P 500 Bear 3X Shares (SPXS)

Vanguard S&P 500 ETF (VOO)

VOO tracks the S&P 500 funds, though it assigns a fairly large allocation to mid-cap firms. It is part of a more extensive portfolio that includes S&P 500 mutual fund share classes. Vanguard issues the fund with $183.18bn worth of Assets Under Management (AUM). The weighted average market capitalization is $473.11B. The index has returned 10.3% in the last three months

SPDR S&P 500 ETF Trust (SPY)

SPY is the oldest and most recognized ETF in the US stock market. The ETF, issued by State Street Global Advisors, tracks an index of US large-cap and mid-cap stocks as selected by the S&P Committee. The ETF has an AUM of $322.42bn and has returned 12.4% in the last three months.

iShares Core S&P 500 ETF(IVV)

IVV is one of the largest ETFs in the world, with excellent exposure to large-cap US equities. This ETF, issued by the foremost investment organization, Blackrock, has a total AUM of $240.67bn. In the last three months. IVV is structured, making it favorable for long term investors because dividends can be reinvested when paid. The ETF has returned 10.2% in the last three months.

iShares S&P 500 Growth ETF (IVW).

IVW is an established growth-focused ETF issued by Blackrock. It tracks companies in the index with growth characteristics (sales growth, earnings growth, and momentum) and provides a balanced exposure to such firms. The fund currently stands at  $32.61B, while its weighted average market capitalization of $769.18B.IVW has returned 9.01% in the last three months

SPDR Portfolio S&P 500 ETF (SPLG)

Issued by State Street Global Advisors, SPLG is a basket of core-exposure funds that track the S&P 500. The index formerly tracked the Russell 1000 Index under the ticker ONEK before it swapped in 2017. SPLG has a weighted average market capitalization valued at $472.77bn, with $8.01bn AUM. the fund has returned 12.4% in the last three months.

ProShares Ultra S&P 500 (SSO)

SSO is a levered product that delivers twice the exposure over a one-day holding period only. Issued by ProShares, the fund tracks the index’s performance and delivers its returns thrice in one day. Unlike other ETFs, SSO is not suitable for a long-term hold but should be used as a short-term instrument. The fund’s AUM is $2.96bn, while the index has returned 26.2% in the last three months.

ProShares UltraPro S&P500 (UPRO)

UPRO provides 3x exposure to S&P 500 Index’s daily returns. The fund invests in financial instruments, which the issuer (ProShare Advisors) believes would reproduce 3x the index's daily returns. Assets under the fund’s management are valued at $1.81bn, while the fund has returned 33.2% in the last three months.

Direxion Daily S&P 500 Bull 3X Shares (SPXL)

SPXL seeks three times the daily performance of the S&P 500. The fund invests about 80% of its net assets in financial instruments that provide daily leveraged exposure to the S&P 500. This may include stock, swap agreements, and other ETFs. The fund’s AUM is $1.67bn, while it has returned 33.12% in the last three months.

ProShares UltraPro Short S&P500 (SPXU)

SPXU seeks daily investment returns that are three times the inverse (-3x) of the daily performance of the S&P 500 for one day. This implies the fund reflects three times the opposite performance of the index. The fund would be most profitable during bear markets. The fund has a total asset base valued at $657.47m under its management. SPXU has slid by 32% in the last three months.

Direxion Daily S&P 500 Bear 3X Shares (SPXS)

SPXS seeks three times inverse returns of the daily performance of the S&P 500. The fund, which is issued by ProShares, achieves its investment goals by investing in swaps, futures contracts, short positions, or other financial instruments that offer short leveraged exposure to the index. The fund’s AUM is $528.39m. SPXS has returned 15.3% in the last three months.

Expert tip on investing in S&P 500 ETFs

Do not trade during opening or closing hours. This is the time most trading activities go on, and as such, there is always an increase in volatility. Also, be careful with 3x leveraged S&P 500 ETFs because they come with higher risks.

Why trade S&P 500 ETFs?

There are a plethora of reasons to trade S&P 500 ETFs. First, there is the possibility of having attractive returns: index funds generally return about 10% annually.

Also, S&P 500 ETFs are a veritable means of having a diversified portfolio, even with a little capital. With one purchase, you can have a stake in a wide range of companies — one share of the fund provides ownership in multiple companies.

Investing in S&P 500 ETFs comes at a lower risk than investing directly in the company's shares — they are diversified, and the risk exposure and volatility is reduced. It is also cheaper to invest in S&P 500 ETFs, which are less expensive than buying the actual stocks.

Frequently Asked Questions

  1. The largest S&P 500 ETF is the SPDR S&P 500 ETF Trust (SPY) with $317.48B in assets.

  2. Given the recent sell-off and market volatility, yes, the S&P 500 ETF is a good investment right now

  3. Anyone of legal age can invest in ETFs.

  4. An ETF is a basket of shares of different companies sold as one unit, while stock gives you ownership of one company.

  5. Yes, ETFs are a very good investment for beginners.

  6. The market is worth over $322.42bn.