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You often hear it talked about in the news but few take the time to explain what the S&P 500 is or why it matters. We explain the basics and how you can invest in it from India.
The S&P 500 is a stock market index that tracks the performance of the 500 largest US companies listed on the stock exchange. It’s a key indicator because it’s used as a benchmark for the performance of the broader US stock market.
So if you see the S&P 500 index rise or drop significantly on any given day, it’s probably because of a major event that’s impacting thousands of US corporations and even the economy.
What is the S&P 500?
The Standard and Poor’s 500, best known as the S&P 500, is a stock market index of the 500 largest listed companies in the United States, measured by market capitalisation. Its name comes from the company created when Poor’s Publishing and the Standard Statistics Company merged. It created an index compiled of 90 companies, later expanding it to 500.
The S&P 500 is home to some recognisable brands, including many technology stocks, such as Twitter and Netflix. The largest ten stocks in the index make up 21% of it, and the top four are all technology stocks: Microsoft, Amazon, Facebook and Alphabet.
Can I invest in the S&P 500 from India?
Yes, there are a number of ways you can invest in the S&P 500 from India. The S&P 500 is a stock market index that tracks the performance of 500 leading US companies that are listed on the stock exchange. This means you can’t directly invest in the S&P 500, but can buy stocks in the companies that make up the S&P 500, buy an index fund or exchange-traded fund (ETF) that tracks the overall performance of the S&P 500 index.
How to invest in the S&P 500
- Find an S&P 500 ETF or index fund. Some funds track the performance of all 500 S&P stocks, whereas others only track a certain number of stocks or are weighted more towards specific stocks. You should select the fund that best suits your investment goals.
- Open a share-trading account. In order to invest in an S&P 500 fund, you’ll need to open a trading account with a broker or platform. Keep in mind that some funds may only be available on certain brokerages or platforms. Some of the providers in our comparison table below let you invest in US shares. We’ve also listed some funds below that you can invest from India.
- Deposit funds. You’ll need to deposit funds into your account to begin trading. Some brokers may charge you deposit fees, or you may need to pay a forex fee in order for your rupees to be converted into US dollars.
- Buy the fund. Once your money has been deposited, you can then buy the S&P 500 ETF or index fund. You’ll generally pay a small annual fee to invest in an ETF or index fund.
What S&P 500 funds can I buy in India?
There are some S&P 500 ETFs and index funds that you can invest in from India, and you’ll have access to even more if you have an account with a trading platform or broker that offers direct access to the US stock market. Here are some to help you get started:
- SPDR S&P 500 ETF Trust (SPY)
- Vanguard S&P 500 ETF (VOO)
- Mirae Asset S&P 500 Top 50 ETF (MASPTOP50)
- Motilal Oswal S&P 500 Index Fund (MOFSP500)
What is the Indian equivalent of the S&P 500?
The S&P 500 tracks the performance of 500 of the largest companies on US stock exchanges, and is the most popular US stock index. The equivalent of the S&P 500 in India is the Nifty 50, which similarly tracks the performance of the 50 largest companies on the National Stock Exchange of India (NSE).
Like the S&P 500, the Nifty 50 is also used as a general yardstick to measure the relative health and performance of the Indian stock market and wider economy.
How to invest in S&P 500 stocks
If you don’t want to invest in an S&P 500 fund then you can buy individual S&P 500 stocks.
- Find a stock broker. You’ll need one that lets you invest in US stocks – soem of the providers in our comparison table below let you buy US shares.
- Sign up and fund your account. You’ll need to provide some personal details and information about how you’ll fund your account. If you’re buying US stocks you may also need to fill out a W-8BEN form.
- Find a stock you want to invest in. Research some of the shares you’re interested in and find it on your chosen platform. We’ve listed some of the largest stocks on the index below.
- Choose how much you want to invest or how many shares you want. The platform should tell you how much this will cost you.
- Hit buy. It’s as easy as that!
If you choose to invest in all 500 stocks, you’ll find that it’s a very expensive method of investing as you may need to pay trading fees on every single stock you purchase. Some of the stocks in the S&P 500 are also valued in the hundreds of dollars, so you’d need to invest tens of thousands of rupees in order to get exposure to all companies in the index.
If you’re looking to diversify your portfolio by investing in the companies in the S&P 500, it’s likely going to be a lot cheaper and more efficient to invest with the second option. An index fund tracks the performance of the S&P 500.
What stocks are in the S&P 500?
The S&P 500 comprises 500 of the largest US companies by market capitalisation, which means it includes some of the most recognisable and popular stocks in the world. These include the following:
Why should I invest in the S&P 500?
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.
If you only invest in stocks available on the NSE, you’ll be limited in the number of stocks you can buy. Investing in an S&P 500 index fund or opening a trading account that gives you access to the US stock market will let you diversify your portfolio and open up the potential gains offered by US stocks.
How much does it cost to invest in the S&P 500?
There are a couple of fees to keep in mind if you plan to invest in US stocks – the commission fee, which is the cost of carrying out the trade, and the foreign exchange fee, which is the cost of changing your money over to US dollars.
The most expensive part of buying US stocks is the foreign exchange fees. Compare the fees for the providers that have the lowest foreign exchange fee, even if they’re not commission free, to work out whether it might work out cheaper to go with another provider.
How did the S&P 500 perform in 2021?
Like most stock indices, the S&P 500 saw significant volatility in early 2021 as a result of the coronavirus pandemic. However, those who held or bought during the crash saw their investments rise over the next few months, and the S&P 500 reached record highs towards the end of 2021.
Historically, the S&P 500 has had an average annual compounded return of 7.5%. Since 2009, the index has been profitable every year apart from 2018, and in 2020, despite the coronavirus pandemic, it grew by 16.11%. With the pandemic still ongoing in 2022, it remains to be seen how the S&P 500 will fare in 2022.
Pros and cons of investing in the S&P 500
- Access some of the largest US stocks
- Stocks on the S&P 500 tend to be well known and perform pretty well
- You can invest with index funds
- Not completely diversified — you should invest in worldwide stocks to diversify your portfolio a bit more
- Foreign exchange fees
Home to Disney, Netflix, Twitter and Tesla, the S&P 500 is made up of some of the largest technology companies. It’s understandable why investors want to get a look in! Take some time to consider how you want to invest – are there specific S&P 500 companies that you want to invest in, or are you looking to diversify with an S&P 500 index fund or ETF?
Make sure you consider the costs of investing in US stocks, as there will be a foreign exchange or currency exchange fee on top of any commission.
Compare S&P 500 trading platforms
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
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