How to Invest in S&P 500 from the UK
The S&P 500 is one of the most well-known and most followed stock indices in the world. But what is it? What companies are in the S&P 500 and how has it performed in recent years? In this article, we will answer these questions, look at why UK investors might consider investing in the S&P 500 and explain how to invest in the S&P 500 from the UK in 2024.
Table of Contents
What Is the S&P 500?
The S&P 500, shorthand for the Standard & Poor’s 500, is a stock market index composed of 500 of the largest companies listed on US stock exchanges, and is often used as a benchmark by investors for how the US economy is performing as a whole.
It is a capitalisation-weighted index, meaning that each component of the index is assigned a weighting based on their respective market capitalisation. In other words, the larger a company’s market cap, the higher their weighting and, consequently, the greater impact their performance will have on the overall index. The opposite is true for companies with a lower market cap.
S&P 500 Top 10 Constituents by Weight
Being a capitalisation-weighted index means that the performance of the largest S&P 500 companies can have an oversized impact on the index as a whole.
Consequently, for those considering investing in the S&P 500 from the UK, it is a good idea to be familiar with the largest S&P 500 companies, as they can play a decisive factor in the performance of the overall index. The table below shows the top 10 companies in S&P 500:
Data Captured on 30 November 2023.
At the time of writing, out of 500 companies, these 10 account for more than 30% of the total index, illustrating the big impact they can have on the S&P 500’s overall performance.
S&P 500 Historical Performance
Amidst challenging economic conditions, the S&P 500 had a rather wretched time in 2022, plunging by 19.4% in what was the index’s worst year since the Great Recession in 2008. On the other hand, 2023 was far more kind to the index.
Nevertheless, for those considering investing in the S&P 500, it is important to look at the bigger picture. Try not to become too hung up on the index’s performance in any one year but, instead, think long-term and consider what the future holds.
With the S&P 500, we can isolate individual bad years, such as 2008 and 2022, but when we zoom out and look at the big picture, the long-term trend is clearly one of growth.
Despite these bad years, in the 30 years between 1992 and 2022, the S&P 500 index produced an average annualised return of 10.7%.
Nevertheless, past performance is not a reliable indicator of future results. Whilst it can give us an idea of an asset’s long-term growth potential, past performance should not be used as the sole basis for an investment. It is important to fully analyse the asset in question and be aware of all the potential risks before deciding to invest.
Should I Invest in the S&P 500?
Given that the S&P 500 index is composed of 500 of the largest public companies in the US, the answer to the question ‘should I invest in the S&P 500” really lies in how you believe large-cap companies will perform in the US over the long-term.
Whilst it is not recommendable to do so on its own, if we are to use past performance as any kind of indication, investing in the S&P 500 has had the potential to be rewarding over the long-term.
Historically speaking, the US stock market has continuously followed an upward trajectory and, despite many setbacks borne from difficult economic conditions, it has always recovered and gone on to record further growth.
A potential risk of choosing to invest in the S&P 500 from the UK is that, by doing so, you are only gaining exposure to the US stock market. Therefore, if the US market suffers a period of decline or turbulence, your investment will be negatively impacted.
This is why portfolio diversification is important, as it can help protect you from the risk of being over-exposed to any one region, industry or company.
How to Invest in S&P 500 from the UK
Whilst it is not possible to invest directly in the S&P 500, or any other stock index for that matter, investors can gain exposure to stock indices by investing in mutual funds or Exchange-Traded Funds (ETFs) which track the desired index.
These types of funds track indices by using investor money to buy all the component stocks and thus mirror the performance of the overall index. For example, in the case of the S&P 500, a fund would purchase shares in all 500 companies which make up the index, in proportion to their respective weightings.
There are a number of differences between ETFs and mutual funds, one of which is the manner in which they are bought and sold. ETFs are listed on stock exchanges and can, therefore, be considered more accessible for retail investors.
How to Invest in S&P 500 ETF in the UK
In order to invest in S&P 500 ETFs in the UK, you need to firstly find and open an account with a broker which provides access to this type of instrument.
At Admirals, we offer investors a number of different options when it comes to S&P 500 ETFs, all of which are available to UK citizens. These options include the following:
If you are wondering what the difference between these ETFs is, or what is the best S&P 500 ETF, the reality is that there is not an enormous difference between ETFs that track the S&P 500.
Due to the fact that they are all constructed to track the same stock index, any differences in their performance should, in theory, be minimal. However, before selecting an S&P 500 ETF, make sure to check the fees associated with owning that specific ETF and the reputation of the ETF provider.
In order to use an ETF to invest in S&P 500 in the UK with Admirals, follow these 4 steps:
- Open an Invest.MT5 account and log in to the Dashboard
- Locate your account details in the Dashboard and click the ‘Invest’ button to open the MetaTrader Web Terminal
- Search for the desired S&P 500 ETF and open the price chart
- Press 'Create New Order' at the bottom of the screen, enter how many shares in the S&P 500 ETF you want to purchase and click ‘Buy’ to send your order to the market!
Investing with Admirals
Besides offering a number of S&P 500 ETFs, with an Invest.MT5 account from Admirals, investors can buy shares in over 4,500 companies from around the world and more than 200 ETFs. Click the banner below to find out more today:
FAQ - Investing in S&P 500 UK
What Companies Are in the S&P 500?
The S&P 500 is composed of 500 of the largest companies listed on the US stock exchanges.
Can I Invest in S&P 500 from UK?
Yes, UK citizens are able to invest in the S&P 500 using mutual funds or Exchange-Traded Funds (ETFs). At Admirals, we offer UK investors the opportunity to invest in a number of ETFs which track the S&P 500 index.
What Time Does S&P 500 Open UK?
As the S&P 500 is composed of companies listed in the US, its hours reflect those of the US stock exchanges, which are open Monday to Friday from 09:30 to 16:00 local time. In UK time, the trading hours are from 14:30 to 21:00.
What Is the UK Equivalent of the S&P 500?
Whilst there is no direct equivalent, the S&P 500 often draws comparisons with the UK’s FTSE 100, which is composed of the 100 largest companies listed on the London Stock Exchange (LSE).
Should I Invest in FTSE 100 or S&P 500?
The two indices are very different animals and the answer depends on the investor in question. The FTSE 100 is composed of the 100 largest companies listed on the London Stock Exchange (LSE), whilst the S&P 500 is made up of 500 of the largest companies listed on US stock exchanges. The FTSE 100 tends to offer a much higher dividend yield, however, the S&P 500 has vastly outperformed the FTSE 100 in recent years in terms of total return.
How Can I Short the S&P 500?
If you are of the opinion that the S&P 500 will decline, it is possible to take a short position against the index using derivative products such as Contracts for Difference (CFDs). With a Trade.MT5 account from Admirals, you can go long and short on the S&P 500 and a number of other popular stock indices using CFDs.
About Admirals
Admirals is a multi-award winning, globally regulated Forex and CFD broker, offering trading on over 8,000 financial instruments via the world's most popular trading platforms: MetaTrader 4 and MetaTrader 5. Start trading today!
This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.
