You can't buy the S&P 500 directly. You buy a fund that holds the same companies, either an index mutual fund or an ETF, inside an account such as a 401(k), an IRA or a regular taxable brokerage account. That's the whole mechanism. The rest of this page is about the choices around it: which account, what it costs, when to put the money in and what to expect along the way.
The table below shows the contribution limits that decide how much each account type can take in a year.
| Limit | Amount | Source | Retrieved |
|---|---|---|---|
| 401(k) employee contribution limit | $24,500 | IRS, Retirement topics: 401(k) and profit-sharing plan contribution limits | Retrieved 2026-10-05 |
| 401(k) catch-up contribution, age 50 and older | $8,000 | IRS, Retirement topics: 401(k) and profit-sharing plan contribution limits | Retrieved 2026-10-05 |
| IRA contribution limit (traditional and Roth combined) | $7,500 | IRS, Retirement topics: IRA contribution limits | Retrieved 2026-10-05 |
| IRA contribution limit, age 50 and older | $8,600 | IRS, Retirement topics: IRA contribution limits | Retrieved 2026-10-05 |
Two ways to own the index
An index mutual fund and an ETF can track the same index. The differences are mechanical:
- Index mutual fund. You buy and sell at the price set once a day, after the market closes. Some funds set a minimum to open a position.
- ETF. It trades on an exchange all day like a stock, at whatever price the market gives you.
Funds that track the same index still differ in fees and in how closely they follow it. We don't rank them here. The S&P 500 index fund comparison lines up the options side by side, so you can compare S&P 500 index fund fees before choosing.
Which account to hold it in
The fund is the same in any account. The account decides the tax treatment and the rules for taking money out.
A 401(k) comes through an employer, and some employers add a match. An IRA you open yourself. A taxable brokerage account has no contribution limit, but you pay tax on dividends and on gains when you sell. Traditional and Roth versions of the first two differ in when you pay tax, and the details change with your income and situation, so check the IRS pages cited above or ask a tax professional.
What it costs
Every fund charges an annual fee, taken from the fund's assets rather than billed to you. It looks small and it compounds against you. The table uses round illustrative fee levels, not any particular fund's fee, with the same monthly contribution and the same return in every row.
Assumes the S&P 500's 1928–2025 average return of 10.0% a year before fees. Fee levels are round illustrations, not any fund's actual fee.
| Annual fee (illustration) | Balance after 30 years | Cost vs 0.03% |
|---|---|---|
| 0.03% | $1,136,670 | – |
| 0.5% | $1,028,416 | −$108,254 |
| 1% | $925,662 | −$211,008 |
The gap between the rows is money that never reaches you. You can run the same comparison with your own numbers in the S&P 500 investment calculator.
Lump sum or monthly?
If you already have a lump sum, you can invest it all at once or spread it over months. If you are investing from your paycheck, the question doesn't come up: you invest monthly because that's when the money arrives. The summary below compares the two schedules across the historical windows in the data.
| Schedule | Value at end of 2025 |
|---|---|
| $500 a month | $529,742 |
| $120,000 at once, at the start | $950,461 |
| Difference (lump sum minus monthly) | $420,720 |
Lump sum ended higher in 77 of 79 20-year windows since 1928, and in 82 of 89 10-year windows.
Spreading purchases out doesn't raise the expected return. It lowers the chance of putting everything in right before a drop, which is a comfort question more than a math one. To see what regular monthly investing does over time, try the S&P 500 DCA calculator.
How long to hold
The table shows the highest and lowest annualized return for each holding period in the data. Compare how the spread changes as the window gets longer.
| Holding period | Best, annualized | Worst, annualized | Share of periods with a loss |
|---|---|---|---|
| 1 year | 52.6% (1954) | −43.8% (1931) | 26.5% |
| 5 years | 28.3% (1995–1999) | −12.7% (1928–1932) | 11.7% |
| 10 years | 20.1% (1949–1958) | −1.7% (1929–1938) | 5.6% |
| 20 years | 17.7% (1980–1999) | 2.4% (1929–1948) | 0.0% |
Past windows say nothing certain about the next one. For the full decade-by-decade record with dividends and inflation, see S&P 500 returns by decade. For stocks against cash, see S&P 500 vs high-yield savings.
The risks
The S&P 500 is 500 large US companies. It is diversified within one country and one asset class, and it still falls hard.
| Measure | Result | When |
|---|---|---|
| Deepest peak-to-trough fall | −64.8% | End of 1928 to end of 1932 |
| Back to the prior peak | 1936 | First year-end at or above the peak |
| Worst single year #1 | −43.8% | 1931 |
| Worst single year #2 | −36.6% | 2008 |
| Worst single year #3 | −35.3% | 1937 |
These figures use year-end values, so they understate the drops along the way. Within a year the index fell further than the annual numbers show.
These are calendar-year figures. Drops inside a year were larger than the year-end data shows. If you will need the money soon, stocks are the wrong place for it. If you are drawing money down in retirement, bad early years hurt more than bad late ones, which the retirement savings calculator tests with Monte Carlo simulation to show how long your money lasts.
Where to go next
- Project your own balance: S&P 500 investment calculator
- Invest a fixed amount each month: S&P 500 DCA calculator
- Model a single fund: VOO calculator
- Test how long retirement savings last: retirement savings calculator with Monte Carlo
- See when you could stop contributing: Coast FIRE calculator
- Compare fund costs: S&P 500 index fund comparison
¿Vives en España? Mira cómo invertir en el S&P 500 desde España.
How we calculate: methodology and sources.
Past returns don't guarantee future results. This article is educational and is not financial advice.
Source: Damodaran, NYU Stern (S&P 500 total return, bonds, gold, T-bills, CPI), 1928–2025.
