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The S&P is an index of the 500 largest listed companies in the US. It’s 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. We’ve detailed how you can invest in the S&P 500 from the UK, the most popular S&P 500 index and exchange-traded funds (ETFs), and what else you need to consider.
What is the S&P 500?
The Standard and Poor’s 500 (S&P 500) is a stock market index of the 500 largest listed companies in the United States, measured by market capitalisation. It’s 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.
Can I invest in the S&P 500 from the UK?
Yes, there are a number of ways you can invest in the S&P 500 from the UK. 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 or buy an index fund, such as a mutual or exchange-traded fund 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, index fund or mutual fund. Some index 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 index funds may only be available on certain brokerages or platforms. The providers in our comparison table below let you invest in US shares. We’ve listed some index funds below that are listed on the London Stock Exchange (LSE)
- 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 pounds to be converted into US dollars.
- Buy the index fund. Once your money has been deposited, you can then buy the S&P 500 index fund. You’ll generally pay a small annual fee to invest in an ETF or index fund.
Best trading platform for index funds: IG
We chose the IG as our top pick because:- Invest in over 10,000 shares, funds and investment trusts.
- Low costs – Zero commission on US shares, £3 on UK shares.
- Support available 24 hours a day from Sunday to Friday.
Need to know: If your account is inactive for more than 24 months, you will be charged a rolling fee for account inactivity.
Read our review of IG.
What S&P 500 index funds can I buy in the UK?
There are more than 100 S&P 500 index funds listed on the LSE that you can invest in from the UK, 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.
The most popular S&P 500 index funds in the UK include:
- iShares Core S&P 500 UCITS ETF
- Vanguard S&P 500 UCITS ETF
- Invesco S&P 500 UCITS ETF
- Xtrackers S&P 500 Swap UCITS ETF
- SDPR S&P 500 UCITS ETF
- HSBC S&P 500 UCITS ETF USD
- Amundi ETF S&P 500 UCITS ETF USD
- Lyxor S&P 500 UCITS ETF
- Fidelity 500 Index Fund (FXAIX)
- Vanguard 500 Index Investor Share Class (VFINX)
- Schwab S&P 500 Index Fund (SWPPX)
- iShares S&P 500 Index Fund (BSPAX)
- T.Rowe Price Equity Index 500 Fund (PREIX)
- iShares S&P 500 Growth ETF (IVW)
- Portfolio Plus S&P 500 ETF (PPLC)
- Schwab U.S. Large Cap ETF (SCHX)
What’s the best S&P 500 index fund?
As S&P 500 index funds all track the same group of stocks, the returns offered by different funds or ETFs should be fairly similar. When deciding on the best S&P 500 index fund, it’s therefore better to compare them based on the fees they charge, which is measured by Total Expense Ratio (TER).
The cheapest s&P 500 index fund is the Invesco S&P 500 UCITS ETF, which has a 0.05% total expense ratio (TER). This means if you invested £1,000, you’d be charged 50p in annual fees each year. This is followed by the iShares Core S&P 500 UCITS ETF and Vanguard S&P 500 UCITS ETF, which both have a 0.07% TER.
While the performance of different S&P 500 index funds shouldn’t diverge too much, there are some S&P 500 funds that have performed slightly better than others over time.
Here are some of the best performing S&P 500 funds according to JustETF:
| Fund name (Ticker) | 5 year performance | 1 year performance (to 27 September 2021) | Link to invest |
|---|---|---|---|
| Invesco S&P 500 | 112.1% | 26.6% | Invest now Capital at risk |
| iShares Core S&P 500 | 110.0% | 26.4% | Invest now Capital at risk |
| Vanguard S&P 500 | 110.0% | 26.3% | Invest now Capital at risk |
| HSBC S&P 500 | 110.6% | 26.4% | Invest now Capital at risk |
| Xtrackers S&P 500 Swap (XSPX) | 88.9% | 37.1% | Invest now Capital at risk |
What is the UK 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 the UK is the FTSE 100, which similarly tracks the performance of the 100 largest companies on the London Stock Exchange.
Like the S&P 500, the FTSE 100 is also used as a general yardstick to measure the relative health and performance of the UK 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 index 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 – 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 thousands of pounds 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.
Two in three people (67%) in our poll were planning to buy stocks and shares
Finder survey of 2,000 people, May 2020
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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:
- Alphabet (GOOG)
- Amazon (AMZN)
- American Express (AXP)
- Apple (AAPL)
- eBay (EBAY)
- Facebook (FB)
- JPMorgan Chase (JPM)
- McDonald’s (MCD)
- Microsoft (MSFT)
- Netflix (NFLX)
- Nike (NKE)
- Royal Caribbean Cruises (RCL)
- Tesla (TSLA)
- Twitter (TWTR)
- Walt Disney Company (DIS)
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 London Stock Exchange (LSE), 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&P500?
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. Here are some of the costs of buying US stocks with some of the main providers:
| Platform | Fee for a US trade | Foreign exchange fee |
|---|---|---|
| Degiro | €0.50 (£0.43) + $0.004 per share | 0.1% |
| eToro | £0 | 0.5% |
| Freetrade | £0 | 0.45% |
| Hargreaves Lansdown | £11.95 | 1% |
| IG | £10 | 0.5% |
| Stake | £0 | 0.5% |
| Trading 212 | £0 | 0.15% |
| Fineco | $3.95 (£2.98) | 1% |
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&P500 will fare in 2022.
Pros and cons of investing in the S&P 500
Pros
- 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
Cons
- Not completely diversified — you should invest in worldwide stocks to diversify your portfolio a bit more
- Foreign exchange fees
Bottom line
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
Table: sorted by promoted deals first
All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.
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