Is it possible to buy all the stocks that make up e.g. the S&P500 and keep only that as an investment portfolio, rather than buying the corresponding index mutual fund (and paying fees in the process)?

I want to avoid paying any fee that I would incur by buying an index mutual fund. Unless those fees really help me in any way? I'm worried that in the long term, those fees are just a pure loss for me.

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    You'll pay a commission on each of those 500 purchases, and then what do you do when the composition changes? (When a company moves out of the S&P 500 and a new company comes in)? Hardly seems worth the trouble when the fees are so low. – Andrew Savikas Apr 9 '17 at 1:19
  • @AndrewSavikas - thanks that's what I was looking for: it's too expensive to buy the positions individually, and even more so because the composition of the index changes regularly. How often does the S&P 500 changes its composition? – Frank Apr 9 '17 at 18:04
  • @Frank: The composition in terms of which companies are included doesn't vary hugely, but as JoeTaxpayer said the index is cap-weighted, and the market cap of the companies varies constantly so you have to decide how much to let it deviate from your holdings. In practice you're likely to spend as much or more in fees trying to do it yourself. – BrenBarn Apr 10 '17 at 1:01

The S&P is cap-weighted. So it's not as simple as buying 1 share of each of 500 stocks. (If it were, getting started might be doable, although adding to your position would take time and another large unit of money.)

Can you do it? Sure? Do you have enough money to actually do it? I don't know. I'm happy to pay my .02-.03% to not worry about such things.

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  • Thanks - that's the answer I was looking for. Do you mean also that for an index fund, fees should be in the range .02-.03%? I've found some with fees like .4 %. Too much? – Frank Apr 9 '17 at 18:06
  • In my opinion, .05% is the upper limit. 1% over 20 years. .4% is still lower than most, but adds up over time. – JTP - Apologise to Monica Apr 9 '17 at 18:09
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    @Frank genuinely curious, where are you finding S&P500 index funds with expense ratios of 0.4%? – Koen vd H Apr 10 '17 at 4:03
  • I think so, but I would need to double check - that was with Fidelity. – Frank Apr 10 '17 at 15:42
  • My bad - FUSEX is only 0.09%. – Frank Apr 10 '17 at 15:45

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