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The S&P 500 index tracks the performance of 500 major and liquid U.S.-listed companies from multiple industries. Many overseas investors invest in S&P 500 index funds, which passively imitate the index rather than requiring individual stock selection. This provides investors with broader global visibility through a single investment vehicle, as well as the ability to watch the performance of well-established international companies using a simpler investing procedure.
Key Takeaways
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The S&P 500 is a market capitalisation-weighted index that is evaluated and updated by the S&P Index Committee.
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Technology, healthcare, and financial companies account for the majority of the index's sector weightings.
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Indian investors can gain access to the index via local feeder funds and overseas platforms, under RBI's LRS (up to $250,000/year), with low minimums.
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Passive S&P 500 products often have lower expense ratios as compared to actively managed global equities schemes.
Note: Ensure checking fund status before investing. Some international funds pause inflows due to limits, but Motilal Oswal S&P 500 remains open.
What Is S&P 500?
S&P is a stock market index containing the top 500 largest publicly traded companies in the US stock exchange, based on a market capitalisation weighted index.
However, it is not an actual list of the largest corporations in the US in terms of market capitalisation. As a market index, the S&P 500 also considers several other factors for the list. We will come to those later. For now, let’s see how S&P calculates the weighted capitalisation of companies. The formula it uses is the following.
Weighting capitalisation in S&P = company market capital/ total of all market capital
But there is more than just calculating the weighted average. The S&P committee is responsible for selecting the stocks to feature in the top 500 list, base their analysis on a host of factors like market capital, liquidity, and sector allocation.
Many of the companies that feature in S&P 500 are tech and financial companies. It contains names like Meta, Nvidia, Tesla, Netflix, Disney, McDonald's, Microsoft, Google, Coca-Cola, Apple, and more. With nearly 70 years of track record, S&P 500 is one of the oldest market indices and the most powerful. It is followed globally, and not only US investors but also investors from other countries invest in S&P 500 companies through various mutual index funds and ETFs.
If you want to invest in S&P companies but don’t want to go through the process of combing through each company for investing, you can put your money in an S&P index fund.
What’s An S&P 500 Index Fund?
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It helps you to diversify your portfolio and gain broader exposure through investing in the top corporations
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Both index mutual funds and ETFs try to replicate the return generated by the index and, in return, offer investors access to all the securities offered by the index
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Funds investing in the index tend to have very low fees and multiple options to select from, making it attractive to investors who want to limit their risk exposure while optimising their return
Why Is It Worth Investing In S&P 500?
By investing in S&P 500 index funds, you can invest in some of the most influential companies. The index has a proven track record, which clocked a return of 16.1% and 14.7% CAGR in rupee terms in the last five and ten years, respectively, as of October 2025.
Investing in the S&P 500 index fund allows low-cost diversification. S&P 500 has generated good returns over the long term. If you stay invested for a long time and tide over market volatilities, the S&P 500 index generates a handsome return.
How Can Indian Investors Invest In S&P 500 Index Funds?
Indian international funds, including S&P 500 trackers, face ongoing restrictions from RBI/SEBI overseas caps ($7B industry-wide, $1B per AMC). That said,
Vanguard S&P 500 ETF Fund
In 1976, Vanguard introduced the first mutual funds that mimicked the S&P 500 return. In 2010, it introduced the first exchange-traded fund (ETF) following the same S&P stocks, giving individual investors exposure to investing in the top corporations through one investment.
Motilal Oswal S&P 500 Index
It is an open-ended index fund to mimic the return of S&P firms. It is designed to ape the movement of the index, and hence, there is no fund manager to select the stocks for you. It will generate returns like the S&P index, available in both regular and direct plan versions. Investors can invest in a lump sum or set up a SIP plan.
The fund only has a growth option, which means investors need to redeem their units at a higher price as the fund doesn’t pay a dividend. Start with ₹500 via lump sum or SIP. It’s crucial to note that Motilal Oswal S&P 500 Index Fund paused fresh SIPs/inflows from Jan 5, 2025.
Charges and minimum investment limit
Expense ratio: ~0.63% (Direct), ~1.14% (Regular).
What Benefits Can Indian Investors Get By Investing In S&P 500 Mutual Fund?
Index fund suits risk-averse investors. If you don’t want the trouble of tracking your mutual fund investment regularly, investing in index funds is safe with a more predictable return. Another advantage is that index funds are passively managed without a fund manager selecting the stocks. The fund merely invests in stocks already present in the index.
It offers low-cost diversification in the US stocks to receive a higher return from an index that generated a steady performance. The companies listed in the S&P 500 are multinational with massive global outreach, which means you’ll be investing in leading digital, financial, and core sector industries across several sectors.
As the dollar continues to accelerate in value, imports are becoming expensive for Indians. Even the cost of education in US universities is becoming costly. It is likely to continue in the future, so having a portion of your investment invested in S&P 500 funds where you can earn in dollars offers a hedge against an appreciating dollar value.
Conclusion
Investing globally has become more accessible and less intimidating for Indian investors largely because of regulated platforms and passive fund options. By allocating a small part of their portfolio to an S&P 500 index fund, investors obtain exposure to international companies across key industries. This allows for geographic diversity and the chance to profit from long-term performance patterns in the US equities market without choosing specific stocks.
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