When it comes to investing in the stock market, one of the most popular and widely followed indexes is the S&P 500. It’s a benchmark for the US stock market, tracking the performance of 500 of the largest and most successful companies in the country. If you’re new to investing, you may be wondering how to invest in the S&P 500, and one of the best ways to do so is through Fidelity, a renowned online brokerage firm. In this article, we’ll take a closer look at how to invest in the S&P 500 through Fidelity, the benefits of doing so, and what you need to know before getting started.
What is the S&P 500?
Before we dive into how to invest in the S&P 500 through Fidelity, let’s take a brief look at what the S&P 500 is. The S&P 500, also known as the Standard & Poor’s 500, is a stock market index that represents the market value of 500 large, publicly traded companies in the US. These companies are selected by a committee based on market size, liquidity, and industry representation, and are intended to be a representative sample of the US stock market as a whole.
The S&P 500 is widely followed by investors and financial professionals, and is often used as a benchmark for investment performance. It’s a diversified index, with companies from a wide range of industries, including technology, healthcare, financials, consumer staples, and more.
Why Invest in the S&P 500?
There are several reasons why investing in the S&P 500 can be a smart move:
Diversification
One of the biggest benefits of investing in the S&P 500 is diversification. By investing in a single index fund or ETF, you’re gaining exposure to 500 different companies, which can help to reduce risk and increase potential returns over the long term.
Low Costs
Index funds and ETFs that track the S&P 500 often have lower fees than actively managed mutual funds, which can help to save you money over time.
Long-Term Performance
The S&P 500 has a long history of providing strong returns over the long term, making it a popular choice for investors with a time horizon of five years or more.
Professional Management
By investing in an S&P 500 index fund or ETF, you’re effectively getting the benefit of professional management without the high fees associated with actively managed funds.
How to Invest in the S&P 500 through Fidelity
Now that we’ve covered the benefits of investing in the S&P 500, let’s take a look at how to do so through Fidelity.
Opening a Fidelity Account
The first step is to open a brokerage account with Fidelity. You can do this online or by phone, and it typically takes just a few minutes. You’ll need to provide some personal and financial information, and set up a username and password for your account.
Fidelity Index Funds
Fidelity offers a range of index funds that track the S&P 500, including the Fidelity 500 Index Fund (FUSAEX) and the Fidelity ZERO Large Cap Index Fund (FNILX). These funds are designed to track the performance of the S&P 500, and have low fees to help you keep more of your returns.
Fidelity ETFs
In addition to index funds, Fidelity also offers ETFs that track the S&P 500, such as the Fidelity ZERO Large Cap ETF (FNCL). ETFs are traded on an exchange like stocks, and offer the flexibility to buy and sell throughout the day.
Purchasing Shares
Once you’ve opened your Fidelity account and selected the S&P 500 index fund or ETF you want to invest in, you can purchase shares online or by phone. You can invest a lump sum or set up a regular investment plan to invest a fixed amount of money at regular intervals.
Tips for Investing in the S&P 500 through Fidelity
Here are some tips to keep in mind when investing in the S&P 500 through Fidelity:
Start Early
The power of compound interest can work in your favor when investing in the S&P 500. The earlier you start, the more time your money has to grow.
Invest Regularly
Investing a fixed amount of money at regular intervals, such as monthly, can help to reduce the impact of market volatility and timing risks.
Keep Costs Low
Fidelity’s index funds and ETFs have low fees, but it’s still important to keep an eye on costs and avoid unnecessary expenses.
Monitor and Adjust
As your investment portfolio grows, it’s important to regularly review and rebalance your holdings to ensure they remain aligned with your investment goals and risk tolerance.
Risks and Considerations
While investing in the S&P 500 through Fidelity can be a smart move, there are some risks and considerations to keep in mind:
Market Volatility
The value of your investment can fluctuate, and may go down as well as up.
Risk of Loss
There is always a risk that you could lose some or all of your investment.
Inflation Risk
Inflation can erode the purchasing power of your investment over time.
Conclusion
Investing in the S&P 500 through Fidelity can be a great way to gain exposure to the US stock market, with the potential for long-term growth and income. By understanding the benefits and risks of investing in the S&P 500, and following the tips outlined above, you can make informed investment decisions and work towards your long-term financial goals.
Remember, it’s always a good idea to do your own research, consider your own risk tolerance and financial goals, and consult with a financial advisor if needed before making any investment decisions.
| Fidelity S&P 500 Index Funds and ETFs | Expense Ratio |
|---|---|
| Fidelity 500 Index Fund (FUSAEX) | 0.015% |
| Fidelity ZERO Large Cap Index Fund (FNILX) | 0.00% |
| Fidelity ZERO Large Cap ETF (FNCL) | 0.00% |
Note: The expense ratios listed above are current as of the date of publication and are subject to change.
What is the S&P 500 and how does it work?
The S&P 500, also known as the Standard & Poor’s 500, is a stock market index that represents the market value of 500 large, publicly traded companies in the US. It is widely considered to be a leading indicator of the overall health of the US stock market. The S&P 500 is a market-capitalization-weighted index, which means that the companies with the largest market capitalization (i.e. the value of their outstanding shares) have a greater influence on the index’s performance.
The S&P 500 is calculated and maintained by S&P Dow Jones Indices, a division of S&P Global. The index is widely followed by investors, financial analysts, and the media, and is often used as a benchmark for investment portfolios. The S&P 500 includes companies from a wide range of industries, including technology, healthcare, financials, consumer staples, and more. Some of the most well-known companies in the S&P 500 include Apple, Microsoft, Amazon, Johnson & Johnson, and Procter & Gamble.
Why invest in the S&P 500?
Investing in the S&P 500 provides broad diversification and can be an effective way to invest in the US stock market. By owning a small piece of the S&P 500, you essentially own a tiny fraction of each of the 500 companies in the index, which can help spread risk and increase potential returns. Additionally, the S&P 500 has historically provided strong long-term returns, making it a popular choice for investors with a long-term time horizon.
The S&P 500 is also a low-cost way to invest in the stock market, as index funds and ETFs that track the S&P 500 often have lower fees compared to actively managed mutual funds. Furthermore, investing in the S&P 500 can provide a level of consistency and stability, as the index is less prone to drastic ups and downs compared to individual stocks.
What are the benefits of investing in the S&P 500 with Fidelity?
Fidelity is one of the largest and most well-established online brokerages in the US, offering a range of investment products and services to individual and institutional investors. One of the benefits of investing in the S&P 500 with Fidelity is that you can invest with confidence, knowing that your money is with a reputable and trustworthy institution. Fidelity also offers a range of S&P 500 index funds and ETFs with low fees, making it an attractive option for cost-conscious investors.
Additionally, Fidelity provides a user-friendly online platform and mobile app, making it easy to open and manage your account, as well as track your investments. Fidelity also offers a range of educational resources and investment guidance, which can be helpful for beginners or those who need a little extra support.
How do I get started investing in the S&P 500 with Fidelity?
To get started investing in the S&P 500 with Fidelity, you’ll need to open a brokerage account, which can typically be done online or over the phone. Once your account is open, you can fund it with money from your bank account, and then use that money to purchase shares of an S&P 500 index fund or ETF. Fidelity offers a range of S&P 500 index funds and ETFs, including the Fidelity 500 Index Fund (FUSAEX) and the Fidelity ZERO Large Cap Index Fund (FNILX).
You can start investing with as little as $2.50, and you can set up a regular investment plan to automatically invest a fixed amount of money at regular intervals. This can help you take advantage of dollar-cost averaging, which can be an effective way to invest in the stock market over the long term.
What are the risks of investing in the S&P 500?
Like any investment, investing in the S&P 500 comes with risks. One of the main risks is market volatility, which means that the value of your investment can fluctuate significantly over short periods of time. The S&P 500 can also be affected by broader economic trends, such as recessions or changes in interest rates, which can impact the performance of the index.
Additionally, because the S&P 500 is a stock market index, it’s exposed to the risks associated with the stock market, including the risk of individual companies experiencing financial difficulties or going bankrupt. However, the diversification provided by investing in the S&P 500 can help mitigate some of these risks.
How much does it cost to invest in the S&P 500 with Fidelity?
The cost of investing in the S&P 500 with Fidelity will depend on the specific index fund or ETF you choose to invest in. Fidelity offers a range of S&P 500 index funds and ETFs with low fees, including some with no minimum investment requirement and no commissions to buy or sell. For example, the Fidelity ZERO Large Cap Index Fund (FNILX) has a 0% expense ratio, which means you won’t pay any management fees.
In addition to the expense ratio, you may also need to pay a small commission to buy or sell shares of an ETF, although Fidelity does not charge commissions on most ETF trades. Overall, the cost of investing in the S&P 500 with Fidelity can be very low, making it an attractive option for cost-conscious investors.
Is investing in the S&P 500 a long-term or short-term strategy?
Investing in the S&P 500 is typically considered a long-term strategy, as the index has historically provided strong returns over extended periods of time. The S&P 500 has provided an average annual return of around 10% over the past several decades, making it a popular choice for investors with a long-term time horizon, such as those saving for retirement.
While it’s possible to invest in the S&P 500 for shorter periods of time, it’s generally not recommended, as the index can be volatile over shorter periods. Instead, investors with a shorter time horizon may want to consider a more conservative investment strategy, such as investing in bonds or money market funds.