Best S&P 500 ETFs for 2023
S&P 500 ETFs offer investors exposure to the most valuable companies in the U.S. with a single investment. This article covers what S&P 500 ETFs are, the pros and cons of investing in them, and discusses a few S&P 500 ETFs to watch for UK investors.
Table of Contents
- S&P 500 stands for Standard & Poor’s 500 and tracks the top 500 companies in the U.S.
- An S&P 500 ETF is a fund that tracks the S&P 500 index.
- Investing in ETFs can help to diversify a portfolio
What are S&P 500 ETFs?
An S&P 500 ETF is an Exchange Traded Fund (ETF) that tracks the Standard and Poor’s 500 index. This is a weighted index of the 500 most valuable and publicly traded companies in the United States (U.S.). The index is used as a barometer of the state of the American economy as it represents companies from all of the eleven sectors of the stock market and economy.
As an S&P 500 ETF tracks the performance of the S&P 500 index, investors use it to try and build their wealth over time, believing the American economy will also grow. Since its inception in 1957 until 2022, the S&P 500 index has had an annual return average of 10.13%. However, there have also been bear markets and significant drops, so risk management and timing are critical when investing.
But how does an S&P 500 ETF track the index accurately? An S&P 500 ETF can track the index by creating a weighted ETF with stocks according to the index’s rankings of companies based on market capitalisation. For example, suppose the value of Apple Inc. currently resembles 7.17% of the total market capitalisation of the S&P 500 index. In that case, an S&P 500 ETF will also hold the same weighting of Apple shares in the fund.
Best S&P 500 ETFs to Watch
Below is a list of S&P 500 ETFs to watch this year. However, what is the best S&P 500 index fund UK is subjective and will vary between investors. It’s always recommended to do your research before investing. This list can serve as a good starting point to do so.
- Vanguard S&P 500 ETF
- SPDR S&P 500 ETF
- iShares Core S&P 500 ETF
- Xtrackers S&P 500 Inverse Daily ETF
- ProShares Short S&P 500 ETF
Vanguard S&P 500 ETF
The S&P 500 ETF from Vanguard closely tracks the top 500 US companies and is the third-largest S&P 500 ETF in the world. Investors may choose to invest in this ETF because it’s from one of the biggest financial institutions in the world, Vanguard. This S&P 500 tracks the top 500 US companies, of which the biggest companies are in the tech sector.
The top 10 holdings of the Vanguard S&P 500 ETF are allocated as follows: Apple Inc. (7.33%), Microsoft Corp. (6.43%), Amazon.com Inc. (3.25%), NVIDIA Corp. (3.22%), Alphabet Inc. Class A (2.13%), Alphabet Inc. Class C (1.85%), Tesla Inc. (1.83%), Facebook Inc. Class A (1.73%), Berkshire Hathaway Inc. Class B (1.69%) and Exxon Mobil Corp (1.19%).
SPDR S&P 500 ETF
State Street Global Advisors issued the SPDR S&P 500 ETF, the world's largest ETF when considering its assets' total value. This S&P500 ETF tracks the top 500 companies in the US, of which the top 10 are predominantly in the tech sector.
The top 10 holdings of this S&P500 ETF account for 30.51% of the total fund. These are distributed as follows: Apple Inc. (7.2%), Microsoft Corp. (6,73%), Amazon.com Inc. (3.26%), NVIDIA Corp. (3.15%), Alphabet Inc. Class A (1.99%), Meta Platforms Inc. Class A (1.99%), Alphabet Inc. Class C (1.95%), Berkshire Hathaway Inc. Class B (1.73%) and UnitedHealth Group Inc. (1.32%).
iShares Core S&P 500 ETF
BlackRock’s iShares Core S&P 500 ETF is the second-largest S&P 500 ETF and tracks the top 500 US companies. The equities are mainly allocated to Technology (28.09%), Healthcare (13,2%), Financials (12.58%), Luxurious Consumer Products (10.6%), and Communication (9.14%).
The biggest shares of this S&P 500 ETF are allocated to the following top 10 holdings: Apple Inc. (7.19%), Microsoft Corp. (6.72%), Amazon.com Inc. (3.26%), NVIDIA Corp. (3.15%), Alphabet Inc. Class A (2.27%), Meta Platforms Inc. Class A (1.98%), Alphabet Inc. Class C (1.95%), Berkshire Hathaway Inc. Class B (1.73%) and UnitedHealth Group Inc. (1.32%).
Xtrackers S&P 500 Inverse Daily ETF
The Xtrackers S&P 500 Inverse Daily ETF is an inverse ETF that allows you to speculate against the performance of the S&P 500. Traders often use this for short-term trading strategies since the S&P 500 grows by around 10% annually. This S&P 500 Inverse ETF allows traders to speculate on the inverse performance of the S&P 500 index.
The Xtrackers S&P500 inverse ETF tracks the biggest US companies. Most of those companies operate in the tech and healthcare industry, with the top 10 holdings being: Meta Platforms Inc. Class A (8.4%), Merck & Co Inc. (7.66%), Amazon.com Inc. (7.3%), Lilly (4.73%), Alphabet Inc. Class C (4.17%), Cognizant Technology Solution Class A (4.11%), UnitedHealth Group (4.08%), NVIDIA Corp. (4.07%), Johnson & Johnson (4.02%), and Intel-T (4%).
ProShares Short S&P 500 ETF
Another option for speculating on the inverse performance of the S&P 500 is the ProShares Short S&P 500 ETF. This S&P500 ETF does not track individual companies but rather other index funds and traditional assets like treasuries.
The index sector weightings are dominated by Information Technology, covering 28.26% of the total ETF. Other top sectors are Health Care (13.42%), Financials (12.42%), and Consumer Discretionary (10.66%).
The ten index companies subsequently are Apple Inc. (7.72%), Microsoft Corp. (6.81%), Amazon.com Inc. (3.13%), NVIDIA Corp. (2.82%), Alphabet Inc. Class A (1.91%), Tesla Inc. (1.9%), Meta Platforms Inc. Class A (1.71%), Alphabet Inc. Class C (1.66%), Berkshire Hathaway Inc. Class B (1.64%), and UnitedHealth Group Inc. (1.2%).
How to Invest in S&P 500 ETFs
With Admirals, you can invest in the best S&P 500 index funds with the following commissions:
- UK stocks and ETFs – 0.1% of trade value, 1 GBP minimum commission.
- US stocks and ETFs – From $0.02 per share, 1 USD minimum commission.
- Open an account with Admirals.
- Click on Trade on one of your live or demo trading accounts to open the web platform.
- Search for your symbol at the top of the search window.
- Click Create New Order in the bottom window to open a trading ticket to input your trade size, stop loss and take profit level.
Conclusion: Pros & Cons of Investing in S&P 500 ETFs
S&P 500 ETFs typically have the lowest management fees because they do not need to be actively managed (the fees are deducted from the daily net asset value and is something not seen by investors as it is done automatically). However, your stockbroker will charge a fee to buy or sell an ETF so you should take this into consideration.
ETFs can also offer a form of diversification. If one company or asset collapses, your portfolio may be less affected as that asset may only represent a small portion of the S&P 500 index.
However, investing in S&P 500 ETFs is accompanied by some disadvantages. When investing in an asset that tracks a small part of 500 other assets or companies, you won’t see the impact of a company collapsing. This also means you won't benefit from the impact of a single stock moving considerably higher.
With any form of investing, there is always the risk of getting the direction wrong and your investment being negative for some time. This can impact an investor's mental health, so be prepared for winning and losing investments.
- What Are ETFs? ETFs Explained
- How to Trade ETFs with €1000
- The CFD Trading Guide
- How to Invest in the S&P 500 Index
- How to Trade the SP500 Index
FAQs on Best S&P 500 ETFs
What is the best S&P 500 ETF?
The best S&P 500 ETF is subjective to your own financial goals and needs. However, some common S&P 500 ETFs include the iShares Core S&P 500 ETF, SPDR S&P 500 ETF and Vanguard S&P 500 ETF.
What is the best S&P 500 ETF in the UK?
ETF providers such as Vanguard, BlackRock and SPDR offer S&P 500 ETFs that track the S&P 500 index and are commonly available to investors in the UK.
Is S&P 500 ETF a good buy?
It is hard to say if the S&P 500 is a good buy. The S&P 500 ETFs mirror the growth of the S&P 500 index, which has had an annual return average of 10.13% over the past 60 years. It is important to remember, however, that past performance does not guarantee future results, and there have been significant bear markets and declines in the S&P 500 index.
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