You hear it on the news almost every day: “the S&P 500 rose” or “the S&P 500 fell.” For such a widely cited number, though, many people are not quite sure what it actually is or how they could invest in it. This guide from The Finance Reveal explains what the S&P 500 is and how to invest in it, part of our Investing section. This is general education, not investment advice, and investing involves risk, including the possible loss of principal.

What the S&P 500 Actually Is

The S&P 500 is a stock market index that tracks the performance of about 500 of the largest publicly traded companies in the United States. An index is simply a measurement, a single number that summarizes how a whole group of stocks is doing. So when people say the S&P 500 went up, they mean that, on balance, those 500 large companies gained value that day. Because it covers a broad cross-section of major US businesses across many industries, it is widely used as a benchmark for the overall US stock market and, in particular, for large US companies.

The index is weighted by market value, meaning larger companies make up a bigger share of it than smaller ones, so the biggest firms influence its movements more. Being one index made up of hundreds of companies, it offers built-in breadth, a form of the diversification our guide to asset allocation describes. It is important to understand that the S&P 500 is a measurement, not something you buy directly; instead, you invest in funds designed to track it.

Why It Is So Popular With Investors

The S&P 500 is a favorite among long-term investors for a few reasons. The table below summarizes them.

The biggest appeal is instant diversification: by investing in a fund that tracks the S&P 500, you effectively spread your money across hundreds of large companies at once, so no single company sinks your investment. Funds that track the index are also typically very low cost, because they simply mirror the index rather than paying managers to pick stocks, and those low fees leave more of your returns in your pocket, a benefit our guide to index funds and ETFs explains. It is also simple and hands-off, letting you own a slice of the broad US market without researching individual stocks. Historically, the index has delivered solid long-term returns, which is a major draw, though it is essential to remember that past performance does not guarantee future results, and the index can and does fall, sometimes sharply.

How to Invest in the S&P 500

Investing in the S&P 500 is straightforward. Since you cannot buy the index itself, you buy a fund that tracks it, typically an S&P 500 index fund or exchange-traded fund. These funds hold the same companies as the index, so their performance closely follows it. To get started, you open an investment account, such as a brokerage account or a retirement account, then purchase shares of an S&P 500 index fund or ETF within it, the account-setup process our guide to choosing a brokerage walks through.

When comparing funds, one of the most important factors is the expense ratio, the annual fee, since lower fees mean you keep more of your returns, and many S&P 500 funds are extremely cheap. A common long-term approach is to invest regularly, adding money consistently over time regardless of short-term ups and downs, and to hold for the long haul, letting returns compound. This suits the index well because it is meant to be a long-term, buy-and-hold vehicle rather than something to trade in and out of. That said, the S&P 500 still carries stock market risk: it focuses on large US companies, its value fluctuates, and it can decline significantly in downturns, so it should fit within a broader plan suited to your goals and risk tolerance. Used thoughtfully, it is one of the most accessible ways for ordinary investors to participate in the growth of major US companies. For related basics, see our guide to how much money you need to start investing, and explore the full Investing section.

Frequently Asked Questions

What is the S&P 500?

The S&P 500 is a stock market index that tracks about 500 of the largest publicly traded US companies. It is a single number summarizing how those big companies are performing, and it is widely used as a benchmark for the overall US stock market and large US firms. It is weighted by company size, so the biggest companies affect it most. It is a measurement, not something you buy directly.

How do I invest in the S&P 500?

Because you cannot buy the index itself, you invest through a fund that tracks it, usually an S&P 500 index fund or ETF. Open an investment account, such as a brokerage or retirement account, then buy shares of an S&P 500 fund within it. Compare funds mainly on their expense ratio, since lower fees leave you more return. Many investors then add money regularly and hold for the long term.

Is investing in the S&P 500 safe?

It offers broad diversification across hundreds of large companies, which reduces the risk tied to any single company, but it is not risk-free. The S&P 500 is still subject to stock market risk: its value fluctuates and can fall significantly during downturns. It is also concentrated in large US companies. It has historically delivered strong long-term returns, but past performance does not guarantee future results.

What is the difference between the S&P 500 and an S&P 500 fund?

The S&P 500 is the index itself, a measurement of how about 500 large US companies are performing. An S&P 500 fund is an actual investment, an index fund or ETF that holds those companies to mirror the index so you can invest in it. In short, the index is the benchmark, and the fund is the product that lets you put money into what the index tracks.

The Bottom Line

The S&P 500 is a stock market index that tracks roughly 500 of the largest publicly traded US companies, serving as a widely watched benchmark for the US stock market and large American firms. It is weighted by company size, so the biggest companies move it most, and it is a measurement rather than something you buy directly. Investors love it for its instant diversification across hundreds of companies, its typically very low fees, its simplicity as a hands-off way to own the broad market, and its historically strong long-term track record, though past performance never guarantees future results. To invest, you buy a fund that tracks the index, an S&P 500 index fund or ETF, inside a brokerage or retirement account, comparing funds mainly on their expense ratio and then, for many people, investing regularly and holding for the long term. Just remember that the S&P 500 still carries real stock market risk: it is concentrated in large US companies, it fluctuates, and it can fall sharply in downturns, so it belongs within a broader plan matched to your goals and risk tolerance. Used that way, it is one of the simplest, most accessible ways to invest in the growth of major US companies. For related guides, see our articles on index funds and ETFs, choosing a brokerage, and how much money you need to start investing, and explore the full Investing section. This article is general information, not personalized investment advice, and investing involves risk, including the possible loss of principal.