A list, not a product
The S&P 500 is run by S&P Dow Jones Indices. A committee decides which large US-listed companies are in it, and each company's share of the index depends on its size. As companies grow and shrink the list changes.
Because it is only a list, you cannot buy it. What you buy is a fund that owns the same companies in the same proportions. These are called index funds or trackers, and their job is to match the index, not beat it.
Why it is so widely used
Tracker funds are cheap to run because nobody is paid to pick shares. Their yearly fees are among the lowest of any investment.
You also get a slice of hundreds of businesses in one purchase. Over long periods most professional fund managers have failed to beat a simple tracker after their fees, which is the main argument for using one.
It is more top-heavy than it sounds
Five hundred companies sounds very spread out. But weighting by size means the biggest dominate: the largest ten have made up around a third of the index or more in recent years, and most of those are technology companies.
An equal-weight version of the index exists, where every company gets the same share. It behaves quite differently, leaning more on mid-sized companies.
Small choices that matter
Funds tracking the same index differ in their yearly fee, where they are listed, and whether they pay dividends out or reinvest them for you (often labelled distributing and accumulating).
If you live outside the US, the fund is priced in or exposed to US dollars, so the exchange rate will move your returns alongside the companies themselves.
What is inside it
Technology
The largest part of the index by some distance.
For example: Apple, Microsoft, Nvidia
Financials
Banks, insurers and payment networks.
For example: JPMorgan Chase, Berkshire Hathaway, Visa
Healthcare
Drug makers, insurers and medical equipment.
For example: Eli Lilly, UnitedHealth, Johnson & Johnson
Consumer
Shops, cars, food and household goods.
For example: Amazon, Tesla, Walmart, Costco
Communication services
Search, social media and streaming.
For example: Alphabet (Google), Meta Platforms, Netflix
Companies are listed to show what each category means. They are not recommendations, and the list is not complete.
Three ways to invest
There is no single right route. Many people combine them, and plenty decide a broad global fund is all they need.
- 1
Buy individual shares
Pick one or more S&P 500 companies and buy their shares through a broker or investing app.
- Good for
- Simple to understand. You own exactly what you chose.
- Watch out for
- If you only hold a few companies, one bad result can do real damage. Picking winners is hard, even for professionals.
- 2
Buy a ready-made fund
A fund (often an ETF) holds dozens of companies in one purchase. Examples include the Vanguard S&P 500 ETF (VOO), SPDR S&P 500 ETF Trust (SPY) and iShares Core S&P 500 ETF (IVV) in the US, and the Vanguard S&P 500 UCITS ETF (VUSA) and iShares Core S&P 500 UCITS ETF (CSPX) in the UK and Europe.
- Good for
- Instant spread across many companies, with very little effort.
- Watch out for
- You get what the fund provider chose, including companies you may not want. Themed funds usually charge more than broad trackers, so check the yearly fee and the top ten holdings. Which funds you can buy depends on where you live.
- 3
Build your own portfolio
Choose your own mix of companies and how much of each, then buy them through your broker. This is what Arithmos helps with: describe the mix in a sentence and it builds and tests one for you to consider.
- Good for
- You decide exactly what is in and what is out, and you can see the reason for every company.
- Watch out for
- More to look after than a fund. Buying many separate shares can cost more in dealing fees, and a tested result is a simulation, not a promise.
The risks
- Market falls. The S&P 500 roughly halved in 2000 to 2002 and again in 2007 to 2009, and has fallen by a quarter or more on other occasions.
- One country. It is entirely US-listed companies.
- Concentration. A few very large technology companies drive a lot of the result.
- Currency. For investors outside the US, the dollar's moves add to or take from returns.
- No guarantee. A strong past decade does not make the next one strong.
Try it yourself
The quickest way to understand a portfolio is to look at one. Here is how to turn this guide into something you can inspect.
- 1
Start from the idea
The button below opens the builder with this guide's idea already typed in. Change any part of it: the number of companies, the countries, the limit per company.
- 2
Read the reason for every company
You get a list of companies, how much of each, and a plain-English reason for each pick. If one looks wrong to you, you can ask for it to be changed.
- 3
Look at the bad years, not just the good ones
The portfolio is replayed against real past prices. Check the biggest fall along the way, and ask yourself whether you could have sat through it.
- 4
Decide for yourself
If you want to act on it, you buy the shares yourself through your own broker. Arithmos never holds your money or places trades.
“The 50 biggest US companies, the same amount in each, so no single company dominates.”
Browsing portfolios other people have published is free. See pricing for what building your own includes. A tested result is a simulation using past prices. It is not a forecast and not a recommendation.
Common questions
Can I buy the S&P 500 directly?
No. It is a list, not something you can purchase. You invest in it by buying a tracker fund that holds the companies on the list.
What is the difference between funds that track the S&P 500?
They hold the same companies. They differ in yearly fee, the stock exchange and currency they are listed in, and whether dividends are paid out or reinvested.
Is the S&P 500 a safe investment?
It is diversified across many companies, which is not the same as safe. It has had several deep falls, and it can stay below a previous high for years.
