Picking a fund that tracks the S&P 500 Index may seem like a simple task. After all, an index fund is designed to mirror an index’s holdings, so issues such as a manager’s quality or investment style don’t come into play.

But it’s actually harder than you might expect. There are more than 50 S&P 500 Index funds to chose from.

While all of these funds have identical portfolios, Alex Bryan, director of passive strategies for North America at Morningstar, says that the funds can vary considerably on everything from cost to tax efficiency.

What to Look For

So how do you distinguish among all the choices? Bryan recommends screening the funds you are considering by four criteria.

1. Examine the fees. During the past decade, the index fund has become less expensive, but there are still big cost differences between them. The lowest cost S&P 500 Index funds have an expense ratio of less than 0.1 percent, which means an investor would pay $1 or less in fees for every $1,000 invested. The most expensive, however, charge 10 times as much. There are twelve S&P 500 Index funds that charge 0.1 percent or less, according to Morningstar data.

Keep in mind that bigger funds generally have smaller fees, Bryan notes. That’s mainly because funds with more assets under management have greater scale and can reduce their costs.

2. Consider the fund’s tracking error. This number shows how closely a fund's performance mirrors the index. Funds can deviate from the S&P 500 Index’s performance for a number of reasons, including the fees a fund charges. But Bryan says the rule of thumb is that the tracking error should be close to the fund’s expense ratio. You can find the fund's tracking error on Morningstar.com by clicking on the "performance" tab. Investors can also turn to Yahoo Finance or Google Finance to compare the fund's performance to the benchmark index. 

3. Examine the fund’s tax efficiency. The rule of thumb is that exchange-traded funds are more tax efficient than mutual funds, which means ETFs are often a better choice for investors with taxable accounts. But you can also check tax efficiency by visiting Morningstar.com and clicking on the "tax" tab for a particular fund. There, you'll see pre-tax and after-tax returns. 

4. Consider the fund’s parent company. The fees you are charged can vary according to the company from which you buy the index fund. If you invest in a Vanguard fund, for example, it makes its funds available at its own cost—so the fees can be very low. For-profit companies, such as Fidelity, have shareholders to think about. So they aren't always able to offer as good a deal, though that isn't always the case. On the other hand, a firm like Fidelity may be able to offer you more advice.

After screening the funds using these criteria, you may have a handful that look like good choices. You can narrow them down by looking at the minimum investment requirements. An index fund can require a $500 minimum or as much as $25 million to invest. An index fund with bigger minimums is generally targeted toward institutional investors.

Fidelity’s Spartan 500 Index (FUSEX), for example, may look like a good choice, but if its minimum investment of $2,500 is too high, look at others. The iShares Core S&P 500 Index (IVV) and the Vanguard 500 ETF (VOO) don’t require a minimum investment and they both have have lower fees than the Fidelity fund.

10 Low-Cost S&P 500 Index Funds

Ticker1-year return1-year tracking errorMinimum investment Expense ratio

Assets under management (billions)

Fidelity Spartan 500 Index





Northern Stock IndexNOSIX1.620.07






variable 1



Schwab S&P 500 Index





DFA US Large Company



iShares Core S&P 500IVV1.670.01

variable 1



TIAA-CREF S&P 500 Index InstlTISPX1.660.07




Vanguard 500 ETFVOO1.680.02

variable 1



SEI S&P 500 Index A (SIIT)SPINX1.660.13




State Street Equity 500 Index IISSEYX1.80.1900.03


Morningstar, Inc., Returns Data from 5/31/2015-5/31/2016
  1. requires purchase of at least one ETF share at market price