Buying an S&P 500 ETF is one of the simplest and most effective ways to invest in the US stock market. With a single purchase, you gain exposure to 500 of America's largest companies across every sector. Here is exactly how to do it, step by step.
Step 1: Choose Your S&P 500 ETF
There are several S&P 500 ETFs available, but four dominate the market. SPY (SPDR S&P 500) is the oldest and most heavily traded, ideal for active traders. VOO (Vanguard S&P 500) offers the lowest cost at 0.03%. IVV (iShares Core S&P 500) matches VOO's fee and has strong institutional following. SPLG (SPDR Portfolio S&P 500) is the lowest-priced per share, ideal if you cannot buy fractional shares.
The Fee Difference Matters
SPY charges 0.0945%, while VOO and IVV charge 0.03%. On a $100,000 investment, that is $94.50 versus $30 per year. Over 30 years with compounding, this difference amounts to thousands of dollars. For long-term buy-and-hold investors, VOO or IVV is the clear winner.
Step 2: Open a Brokerage Account
If you do not have one already, open an account at a major broker like Fidelity, Schwab, or Vanguard. All offer zero-commission ETF trading and fractional shares. The account opening process takes about 15 minutes online and requires your Social Security number and bank information for funding.
Choose between a taxable brokerage account and a tax-advantaged retirement account (IRA or Roth IRA). For long-term investing, a Roth IRA offers tax-free growth and withdrawals in retirement.
Step 3: Fund Your Account
Link your bank account and transfer funds. Most brokers allow you to start trading immediately with a pending ACH transfer, though it may take 1-3 business days to fully settle. Wire transfers are available for same-day funding.
Step 4: Place Your Order
Search for your chosen ticker (VOO, SPY, IVV, or SPLG). Select "Buy" and choose your order type. A limit order lets you set your maximum price, while a market order buys immediately at the current ask price. For S&P 500 ETFs with tight spreads, market orders are generally fine, but limit orders give you more control.
Enter the number of shares or dollar amount (if using fractional shares). Review your order and submit. Your shares will appear in your account within seconds.
Step 5: Set Up Recurring Investments
The real power of S&P 500 investing comes from consistency. Set up automatic recurring purchases — weekly, biweekly, or monthly — to dollar-cost average into the market. Most brokers support automatic investment plans for ETFs. This removes emotion from the equation and builds wealth steadily over time.
What to Expect
The S&P 500 has returned approximately 10% annually over the long term, including dividends. Expect significant year-to-year variation — some years will see 20%+ gains, others will decline. The key is staying invested through the volatility. Explore our buy and hold strategy guide for more on long-term investing discipline.
