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How to invest in the S&P 500 in Canada

Ways to invest in one of the world's most popular stock indices from Canada.

Billionaire investor Warren Buffett has said “for most people, the best thing to do is to own the S&P 500 index.” So what is the S&P 500 and how do you invest?

How to invest in the S&P 500 in Canada

  1. Choose a trading platform. Compare things like fees and tradable assets. For example, if you want to invest in an S&P 500 mutual fund, make sure the broker you choose offers mutual fund investing.
  2. Open and fund an account. Complete an application with your personal details and link a bank account for funding.
  3. Research investment options. Find the stock, ETF or mutual fund by name or ticker symbol and research it before deciding if it’s a good investment for you.
  4. Purchase the security. Buy your desired number of shares with a market order or use a limit order to delay your purchase until the stock reaches a desired price.
  5. Monitor your investment. Periodically check on your investment to make sure it’s aligned with your objectives.

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What is the S&P 500?

The S&P 500 is a market capitalization-weighted stock market index of over 500 leading US companies in the most prominent industries of the US economy, traded on either the New York Stock Exchange (NYSE) or Nasdaq.

The index was first introduced in 1957. Today, the S&P 500 covers approximately 80% of available market cap and is widely regarded as the best single measure of US stock market performance.

What companies are in the S&P 500?

The S&P 500 includes some of the most recognizable and popular stocks in the world. The top ten constituents make up around 35% of the entire S&P 500, with Microsoft alone representing over 7% of the total index. This is why when Microsoft is down, the entire index feels it. The top 10 constituents of the S&P 500 by index weight as of June 11, 2024 are:

ConstituentSectorBuy Stock

Microsoft (MSFT)

Technology

Buy on Interactive Brokers

NVIDIA (NVDA)

Technology

Buy on Interactive Brokers

Apple (AAPL)

Technology

Buy on Interactive Brokers

Amazon.com (AMZN)

Consumer Cyclical

Buy on Interactive Brokers

Meta Platforms Class A (META)

Communication Services

Buy on Interactive Brokers

Alphabet A (GOOGL)

Communication Services

Buy on Interactive Brokers

Alphabet C (GOOG)

Communication Services

Buy on Interactive Brokers

Berkshire Hathaway B (BRK-B)

Financial Services

Buy on Interactive Brokers

Eli Lilly & Co (LLY)

Healthcare

Buy on Interactive Brokers

Broadcom (AVGO)

Technology

Buy on Interactive Brokers
Closing prices are in USD

2 ways to invest in the S&P 500

You can’t invest directly in the S&P 500, as it’s just an index that tracks stock performance. It’s not a fund that holds stocks for investors. But there are a couple of ways you can invest in S&P 500 companies.

1. Buy an index fund that tracks the S&P 500

The easiest way to invest in the S&P 500 is to invest in either an exchange-traded fund (ETF) or mutual fund that tracks the S&P 500. Funds that track an index like the S&P 500 are known as index funds.

Index funds are designed to track the performance of and achieve approximately the same return as an underlying index, in this case the S&P 500. S&P 500 index funds will have exposure to the top constituents—Microsoft, Apple Amazon, etc. These funds are a great way to add instant diversification to your portfolio at a low cost.

Since most S&P 500 index funds should in theory achieve nearly similar returns, a fund’s performance may not be the most important factor when deciding which to invest in. Investors should pay closer attention to expenses, which are what will vary the most between funds.

Here some of the lowest-cost S&P 500 index funds

FundExpense ratioFund type
Fidelity 500 Index Fund (FXAIX)0.015%Mutual fund
Schwab S&P 500 Index Fund (SWPPX)0.02%Mutual fund
iShares Core S&P 500 ETF (IVV)0.03%ETF
SPDR Portfolio S&P 500 ETF (SPLG)0.02%ETF
Vanguard S&P 500 ETF (VOO)0.03%ETF
Vanguard 500 Index Fund Admiral Shares (VFIAX)0.04%Mutual fund

2. Buy S&P 500 stocks individually

An alternative way of investing in the S&P 500 is to buy individual stocks in companies listed in the index. This would mean buying and owning individual shares of the FAANG companies like Meta (Facebook), Apple, Amazon and so on.

Compare trading platforms to invest in the S&P 500

1 - 6 of 6
Name Product Finder Rating Available Asset Types Stock Trading Fee Account Fee Signup Offer Table description
Interactive Brokers
Finder Score:
★★★★★
4.2 / 5
Stocks, Bonds, Options, Index Funds, ETFs, Currencies, Futures
min $1.00, max 0.5%
$0
N/A
Winner for Best Overall Broker in the Finder Stock Trading Platform Awards.
Moomoo Financial Canada
Finder Score:
★★★★★
3.9 / 5
Stocks, Options, ETFs
$0.014/stock
$0
Get up to $1,200 or a $1,200 Apple gift card
Trade US stocks for up to 90% less and access free real time stock quotes and level 2 market data. T&C's Apply.
CIBC Investor's Edge
Finder Score:
★★★★★
3.7 / 5
Stocks, Bonds, Options, Mutual Funds, ETFs
$6.95
$0 if conditions met, or $100
100 free trades + up to $4,500 cash back
An easy-to-use platform with access to a variety of tools to help you trade with confidence.
RBC Direct Investing
Finder Score:
★★★★★
3.8 / 5
Stocks, Bonds, Options, Mutual Funds, ETFs, GICs
$6.95 - $9.95
$0 if conditions met, otherwise $25/quarter
N/A
Enjoy no minimum trading activity requirements and pay just $9.95 per trade or $6.95 if making 150 trades per quarter.
Questrade
Finder Score:
★★★★★
3.9 / 5
Stocks, Bonds, Options, Mutual Funds, ETFs, GICs, International Equities, Precious Metals
$4.95 - $9.95
$0
Get $50 in free trades when you fund your account with a minimum of $1,000.
Opt for self-directed investing and save on fees or get a pre-built portfolio to take out some of the guesswork.
Qtrade Direct Investing
Finder Score:
★★★★★
3.6 / 5
Stocks, Bonds, Options, Mutual Funds, ETFs, GICs
$6.95 - $8.75
$0 if conditions met, otherwise $25/quarter
Get up to a $150 sign-up bonus. Use code OFFER2024. Ends October 31, 2024.
Low trading commissions and an easy-to-use platform with access to powerful tools and a wide selection of investment options.
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How to invest in the S&P500 in Canada

S&P 500 Market Update: May 2024

  • June 7, 2024: KKR & Co., CrowdStrike and GoDaddy will join the S&P 500 as part of its latest quarterly weighting change. The companies will replace Robert Half, Comerica and Illumina, according to Yahoo Finance.
  • May 6, 2024: Stocks closed near session highs on Monday, as the S&P 500 notched its best three-day run in a rip-roaring 2024. Wall Street continued to build on an end-of-week surge precipitated by a softer-than-expected jobs report that helped spur bets toward an earlier rate cut from the Federal Reserve, according to Yahoo Finance.
  • Apr 8, 2024: The S&P 500 has been on a tear recently, with multiple financial firms raising their price targets on the tech-heavy index. US Federal Reserve Chair Jerome Powell said the central bank still sees room for rate cuts this year, according to a recent Wall Street Journal article.
  • Mar 12, 2024: The S&P 500 closed at a YTD record high of 5,175.27 points, reflecting continued optimism that the US Federal Reserve will soon cut rates. Oracle and NVIDIA stock soared in light of rumours that the tech giants are collaborating to develop AI technology infrastructure.

Is now a good time to invest in the S&P 500 in Canada?

Historically, over the past 10 years, the S&P 500 has seen an average annual growth rate of 10.64%. Since 2009, the index has been profitable every year except for 2015, 2018 and 2022.

However, with inflation, rising interest rates and economic instability concerning investors, the S&P 500 will mimic what the overall market is doing. Remember that the S&P 500 tracks large cap U.S. companies, so if the overall U.S. (and global) economy is down, indices that track the market will be as well. There is no way to earn above-average returns.

However, economic dips are temporary and S&P 500 ETFs are focused on the long game. While no investments are immune to market downturns, S&P 500 ETFs are more likely to bounce back from these temporary downturns. Historically, the index has bounced back from every crash, bear market, and recession in history. So, no matter what’s to come, you can feel confident that investments that track the index will eventually recover.

Why should I invest in the S&P 500 index from Canada?

  • Access. The S&P 500 features some of the largest and most successful companies in the world and has historically given investors a decent return on their investment. In order for a stock to be considered for the S&P 500 it must have a market cap of at least $15.8 billion USD.
  • Diversification. Investing in the S&P 500 allows you to gain exposure to 500 different companies at once, which diversifies your portfolio. Diversification is important because if one stock in the index drops, your entire portfolio doesn’t necessarily drop too.
  • Convenience. The index itself aims to track the market, which makes it a convenient way to diversify your portfolio without having to buy and sell a number of individual stocks.

Keep in mind that the stocks in the index are all large, household name companies, which opens you up to the potential gains offered by large U.S. stocks. However, since the index is comprised of entirely U.S. companies, your portfolio will take a hit if the U.S. economy (and likely the global economy) suffers.

Pros and cons of investing in the S&P 500

Pros

  • Exposure to America’s leading companies. Gain exposure to America’s most influential companies, including Apple, Microsoft, Amazon and Google (Alphabet) with a single purchase.
  • Instant diversification. Buying a single share of an S&P 500 index fund will give you exposure to 500 companies, immediately diversifying your portfolio.
  • Competitive long-term performance. The S&P 500’s net total annualized return over the past decade is 10.69% (as of June 11, 2024).
  • Ease of investing. Unless you’re buying up individual stocks, buying shares of an S&P 500 index fund limits the amount of time you need to spend researching and gets you in the market quicker.

Cons

  • It includes only US companies. The S&P 500 includes only stocks of US companies and excludes companies in other parts of the world.
  • It includes only large-cap companies. The S&P 500 includes only large-cap stocks, so you won’t gain any exposure to small-cap or mid-cap stocks, which tend to grow at faster rates than their large-cap counterparts.

Canadians considered stocks a smart investment option in 2023

According to results from the Finder: Consumer Sentiment Survey Q1 (CSTQ1), more than a third (36.18%) of Canadians considered equities to be a smart investment in the first quarter of 2023. This dropped only slightly in the second quarter of 2023 to 27%, according to the Finder: Consumer Sentiment Survey Q2 (CSTQ2).

Men preferred stocks as an investment option, with 41% considered Q1 2023 a “good time to invest in stocks,” compared to 32% of female investors.

Age also had an impact on an investor’s confidence in stocks as an investment opportunity. The youngest generation, Gen Z (investors up to the age of 24) had the most confidence in stocks as a good investment opportunity in the first quarter of 2023 with 53% believing “now is a good time to invest in stocks,” compared to 42% of millennials, 31% of Gen X and 19% of baby boomers.

In general, almost a third of Canadians investors (31%) held stocks outside of their registered accounts, such a retirement savings fund (RRSP) or Tax-Free Savings Fund Account (TFSA) and almost three quarters (72%) bought or sold stock through an online stock platform or app. This seems logical, given that 29% of respondents in the CSTQ2 stated they had never worked with and had no plans to use the services of a financial advisor.

Bottom line

  • Investing in the S&P 500, specifically an S&P 500 index fund, is a great way to diversify your portfolio and grow steady wealth over time.
  • Investing in the S&P 500 is a great option for individual investors of any experience level.
  • Make sure you compare the best investment platforms to figure out which one is best for you.
Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades. Read the Product Disclosure Statement (PDS) and Target Market Determination (TMD) for the product on the provider's website.

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