![]() Actively managed funds that use the S&P 500 as an underlying index, but target an objective or return not matching the index (such as leveraged, inverse or income-oriented exposure) were excluded. Management style: All the funds on this list are passively managed in that they seek to replicate the exact holdings of the S&P 500 index and its returns net of fees. This factor was weighted heavily as it has the greatest effect on an S&P 500 index fund’s tracking error and performance. In general, greater assets signal greater fund popularity among investors.Įxpense ratio: To be considered for this list, an S&P 500 index fund must have a net expense ratio of 0.2% or less. We only considered assets for the specific share class profiled. Total assets: All the funds on this list have accrued at least $1 billion in assets under management. All the funds on this list had a tracking error of 0.25% or less, with lower being better. Tracking error: To measure this, we assessed how much a fund’s 10-year annualized performance differed from that of the S&P 500 index’s 10-year annualized return of 12.26%. This is a quantitative, rearward-looking measure of a fund’s historical performance. Morningstar rating: All the funds selected hold at least a 4-star rating from Morningstar. Our curated ranking of the top S&P 500 index funds was created by screening a list of all available U.S.-listed S&P 500 index funds based on the following must-have metrics: Today, S&P 500 index funds are one of the most popular investment choices in the U.S., thanks to their low costs, minimal turnover rate, simplicity and performance.įor our selection of the best S&P 500 index funds, we screened multiple options that met the following criteria: a 10-year annualized tracking error of 0.25% or less, a net expense ratio under 0.2%, at least $1 billion in total assets, along with a 4-star minimum Morningstar rating and at least a 10-year track record. “The S&P 500 provides broadly diversified exposure across both sectors - such as technology, health care and financials - and styles, such as growth and value,” says Michelle Louie, senior portfolio manager at Vanguard’s Equity Index Group.Īs time went on, more and more fund managers saw the value of what was initially mocked as “Bogle’s folly” and followed suit to launch their own S&P 500 index funds. stock market performance and is widely used today as a benchmark for U.S. This popular equity index is regarded as a barometer of U.S. The inaugural fund was called the Vanguard First Index Investment Trust and tracked the performance of the S&P 500 Index. A change in a fund's general turnover pattern can indicate changing market conditions, a new management style, or a change in the fund's investment objective.The launch of the first commercially viable index fund by the late John “Jack” Bogle, founder and chairman of the Vanguard Group in 1976, marked a watershed moment for investors. Studies show, however, that funds must have very low turnovers (specifically 10% or less) to make appreciable differences in the capital gains distributions. Third, funds with higher turnover tend to distribute more capital gains than low turnover funds, because high-turnover funds are constantly realizing the gains. Second, funds with higher turnover (implying more trading activity) incur greater brokerage fees for affecting the trades. First, it’s an indication of management strategy buy-and-hold vs. Turnover is important for several reasons. Therefore, a $100 million fund that is rapidly growing may buy another $100 million in assets, but have a zero percent turnover if it does not sell any of its holdings. This figure is calculated on the lesser of purchases or sales. ![]() The figure is culled directly from the financial highlights of the fund's annual report. Morningstar does not calculate turnover ratios. High turnover (more than 100%) would indicate an investment strategy involving considerable buying and selling of securities. In practical terms, the resulting percentage loosely represents the percentage of the portfolio’s holdings that have changed over the past year.Ī low turnover figure (20% to 30%) would indicate a buy-and-hold strategy. ![]() A turnover ratio of 100% or more does not necessarily suggest that all securities in the portfolio have been traded. This is a measure of the fund’s trading activity which is computed by taking the lesser of purchases or sales (excluding all securities with maturities of less than one year) and dividing by average monthly net assets.
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