S&P 500 Index Funds
  • S&P 500 index funds follow the S&P 500 index, and they are capitalization weighted
  • No load index funds and no load bond funds are right for many investors, but there are risks involved
  • The S&P 500 index funds, like all index funds, are passively managed which means lower management expenses

S&P 500 index funds can be convenient, and make a great investment for a number of other reasons as well. No load index funds allow for a diversified portfolio with only one investment, without having to spend large amounts of time or wasting a lot of effort choosing individual funds to invest in. S&P 500 index funds have a portfolio which is designed to follow the S&P 500 index. No load index funds can include no load bond funds, stock funds, and commodities funds. What is the S&P 500 though, and why do some index funds follow this index? The S&P 500 is an index which contains the top five hundred companies and their stocks in the United States. Each company included in this index is chosen for top quality and performance concerning their size, their liquidity, and their industry. When it comes to indexes, the S&P 500 reflects the general market, and is used to make investment comparisons. That is because this index is very diverse, and normally covers all of the asset classes. This index is considered the best when it comes to performance, and is used as a model for S&P index funds.

When it comes to no load index funds, there are two basic types: those that are evenly weighted and those that are capitalization weighted. The S&P 500 index funds are capitalization weighted, and this means that these funds will not have investments in all five hundred companies included in the S&P 500 index. Instead, the portfolio of these funds is assembled using statistical sampling, so that the portfolio has specific index subsets that are very likely to perform in the same way as the S&P 500 index being followed. Capitalization weighted funds use this method to minimize transaction costs, because otherwise having the portfolio reflect the constant changes in the S&P 500 index would mean continuous transactions, and these costs being incurred. No load index funds, including no load bond funds that are also index funds, are passively managed, versus other types of funds which are actively managed. This brings down the management expenses of the funds, which translates into a lower operating expense for the investor. Many well known fund families, such as Fidelity and Vanguard, offer no load index funds including S&P 500 index funds. Funds which follow the S&P 500 index normally perform well, and have diverse portfolios so that the risks are minimized.

S&P 500 index funds, like all index funds, offer many benefits. With a single investment you can have a well diversified portfolio, without having to do any of the work involved or take the large amount of time needed to choose many different investments. Index funds are fast and convenient, and there are a number of indexes that can be followed by mutual funds. S&P 500 funds are the most popular of all the index funds, and choosing no load index funds and no load bond funds means that you will see better performance and lower fees than if you choose load index funds. Load funds charge as much as seven or eight percent of the investment simply to help you choose the right S&P 500 index funds, and this is something that most investors do not need. The high load fee is no guarantee that you will get the best investment advice either, because there may be a conflict of interest due to load funds which offer a commission to the broker as well. No load S&P 500 index funds will prevent this, and can help ensure that you choose the right funds for your investment capital, acceptable risk levels, and investing strategies.