What is the S&P 500 and how can I invest in it from Australia?

It's really simple. Here are the quickest and easiest ways to invest in one of the world's most popular stock indices.

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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 Australia.

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, you'll know it's probably because of a major event that's impacting thousands of US corporations and even the economy.

How to invest in the S&P 500 from Australia

There are a number of ways you can invest in the S&P 500 from Australia. As it's a collection of 500 companies, so you can either buy stocks in these companies or you could invest in an S&P500 index fund.

Another approach is to trade the S&P 500 via contracts for difference (CFDs), a derivatives product that allows you speculate on index price movements. This is very different to index fund investing as it's much riskier and you're using leverage to amplify profits and losses.

It's all a little vague, but when you hear of someone "trading the S&P500" in Australia, they're most likely referring to CFD trading. "Investing in the S&P 500 index" on the other hand is associated more with index funds.

It's important to understand that all of these approaches vary significantly in terms of risk.

As a general rule, investing in a single company is riskier than investing in an index fund, while index CFD trading is much riskier still and should only be attempted by experienced traders.

How to find an S&P 500 index fund

Index funds can be either listed on a stock exchange as exchange traded funds (ETFs) or as unlisted funds. There are very few differences between unlisted funds and ETFs and many fund managers such as Vanguard and Blackrock offer investors both options.

If you're new to investing, ETFs can be easier to access because you can invest in them through any regular share trading platform. ETFs also have a lower minimal investment requirement of a few hundred dollars rather than a few thousand dollars for unlisted funds.

To help get you started, here's a list of S&P500 ETFs in Australia to date:

  • iShares S&P 500 AUD Hedged ETF: (IHVV)
  • iShares S&P 500 ETF:L (IVV)
  • BetaShares FTSE RAFI US 1000 ETF SPDR S&P 500 ETF Trust: (QUS)
  • SPDR S&P 500 ETF Trust: (SPY)
  • BetaShares S&P 500 Yield Maximiser Fund (Managed Fund) : (UMAX)
  • ETFS S&P 500 High Yield Low Volatility ETF: (ZYUS)

How to invest in an S&P 500 ETF

  1. Find an S&P 500 index 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. Some are actively managed while others do little more than track the index. Do your research before deciding which is best for you.
  2. Open a share trading account. In order to invest in an S&P 500 ETF, you'll need to open a trading account with a broker or platform.
  3. Deposit funds. You'll need to deposit funds into your account to begin trading.
  4. Buy the index fund. Once your money has been deposited, you can then buy units in the S&P 500 index fund, the same as you would buy stocks. You'll generally pay a small annual fee (called the MER fee) to the ETF fund manager taken out of your returns.

How to invest in S&P 500 stocks

An alternative way of investing in the S&P 500 is to buy individual stocks in the 500 companies listed in the index. You could choose to buy shares in select companies or all 500 of them if you wanted it.

However, buying shares in hundreds of companies is a very expensive method of investing as you typically need to pay brokerage fees on every trade you make. 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 dollars 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 buy an S&P 500 ETF or index fund.

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:

Compare S&P 500 trading platforms

Data indicated here is updated regularly
Name Product Brokerage on Aus Index Funds Inactivity fee Markets Currency conversion fee
CMC Markets Stockbroking
AUD 11 or
0.1%
AUD 15 per month if you make no trades in that period
ASX shares
Global shares
Forex
CFDs
Margin trading
Options trading
mFunds
0.60%
Access a broad range of investment products from Australia and overseas.
Invest in managed funds, trade shares, warrants, options and CFDs listed across the ASX, SSX and Chi-X, and other major global exchanges, including US, Canada and UK markets.
eToro Share Trading
N/A
USD 10 per month if there’s been no login for 12 months
Global shares
Forex
CFDs
0.50%
Zero brokerage share trading on US stocks with trades as low as $50.
Note: This broker offers CFDs which are volatile investment products and most clients lose money trading CFDs with this provider.
Join the world’s biggest social trading network when you trade stocks, commodities and forex from the one account.
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Important: Share trading can be financially risky and the value of your investment can go down as well as up.

Data indicated here is updated regularly
Name Product Minimum Opening Deposit Minimum Opening Deposit Commission - ASX 200 Shares Available markets Platforms
Plus500 CFD
AUD 100
100
No commission
ASX shares, global shares, indices, options, ETFs
Plus500 Web Trader
Disclaimer: Volatile investment product. Most clients lose money trading with this provider.
Finder exclusive offer: Open a new trading account and receive a welcome bonus of AU$110 when you deposit your first $370 and enter the bonus code “Special200”. T&C’s apply.
Trade CFDs on Australian and International shares, indices, cryptocurrencies, commodities and more.
IC Markets CFD (True ECN Account)
$200
$200
0.1% per side
ASX shares, global shares, indices, commodities, forex, cryptocurrencies
MetaTrader 4
MetaTrader 5
cTrader
Disclaimer: Volatile investment product. Most clients lose money trading with this provider.
Trade 230+ different products with fast execution under 40 milliseconds on average.
eToro CFD
USD 50
USD 50
No commission
ASX shares, global shares, indices, cryptocurrencies, commodities, ETFs
eToro Trading Platform
Disclaimer: Volatile investment product. Most clients lose money trading with this provider.
Join the largest social trading network in the world.
City Index CFD
AUD 0
0
0.08% with $5 minimum
ASX shares, 4,500 global shares, indices
MetaTrader 4
At Pro
Advantage Web
Disclaimer: Volatile investment product. Most clients lose money trading with this provider.
Trade CFDs on indices, FX, global & Australian shares and commodities, plus access other markets such as metals, bonds and interest rates.
IG Markets CFD
AUD 0
0
0.08% with $7 minimum
Indices, FX, Shares, Commodities, Cryptocurrency, ETPs
MetaTrader 4
ProReal Time
Disclaimer: Volatile investment product. Most clients lose money trading with this provider.
Introductory offer: Build confidence by trading at lower minimum trade sizes for the first six weeks. Plus, receive a reduced commission on Australian shares CFDs. T&C's apply. Trade from over 15,000 markets with Australia's leading service for CFD trading and forex.
Blueberry Markets CFD Trading
$100
$100
$20 per month subscription plus 2% of trade size
Indices, ASX200 Shares, Commodities, Cryptocurrency
MetaTrader 5
Disclaimer: Volatile investment product. Most clients lose money trading with this provider.
Bottom of the market fees on forex, CFDs and commodities with 24/7 quality customer service.
CMC Markets
$0
$0
0.09% with a $7 minimum
ASX shares, 25+ global exchanges, treasuries, indices
CMC Next Generation CFD, MetaTrader 4
Disclaimer: Volatile investment product. Most clients lose money trading with this provider.
Share CFD and forex ideas with other traders and take your strategy to the next level with over 100 technical indicators and charts on CMC’s mobile-friendly Next Generation platform.
ThinkMarkets CFD
$0
$0
From $7 or 0.08%. (whichever is higher)
Forex, indices, commodities, metals, share CFDs, ETF CFDs, futures
MetaTrader4, MetaTrader5, ThinkTrader
Disclaimer: Volatile investment product. Most clients lose money trading with this provider.
Trade forex, commodities and CFDs using MetaTrader4/MetaTrader5 platforms or access advanced analysis tools through ThinkTrader.
AxiTrader CFD
USD 0
0
$0 for standard account, USD$7 per round trip for Pro account
Forex pairs, Metals, Commodities, Index CFDs
MetaTrader4, MetaTrader4 Next Gen, Psyquation, AutoChartist, WebTrader, Axi-One ECN
Disclaimer: Volatile investment product. Most clients lose money trading with this provider.
AxiTrader uses the popular MT4 trading platform along with several free add-ons. Live chat, email and phone support available 24 hours a day, Monday to Friday.
Important: AxiTrader is undergoing a review by the Administrative Appeals Tribunal into a recent decision by ASIC to suspend its Australian financial services (AFS) licence. Until a final decision has been made by the Tribunal, AxiCorp can continue normal operations. 
Pepperstone CFD
USD 200
200
No commission
ASX shares, global shares, indices, cryptocurrencies, commodities
MetaTrader 4
MetaTrader 5
cTrader
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76.5% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Trade stock indices on the global market, via Pepperstone's MetaTrader 4 and cTrader client terminals.
FP Markets CFD (Professional Account)
AUD 1,000
1,000
0.10% with $10 minimum
ASX shares, 6 global exchanges, indices, cryptocurrency
IRESS
Disclaimer: Volatile investment product. Most clients lose money trading with this provider.
Trade CFDs with FP Markets using the IRESSTrader platform. Trade CFDs on international equities, futures and forex.
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Disclaimer: CFDs and forex are complex financial products that come with a high risk of losing money. Most retail client accounts lose money trading CFDs and forex. Consider whether you can afford to lose your money.

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 Australian Securities Exchange (ASX), 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.

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

Like most stock indices, the S&P 500 has seen significant drops in 2020 as a result of the coronavirus pandemic. While those who invested in the S&P 500 at the start of the year will have lost money, many investors will see the recent crash as a good opportunity to buy S&P 500 stocks or funds.

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, but it remains to be seen how it will fare in 2020.

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. Capital is at risk.

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