How to Invest in the S&P 500 from the UK

Wondering how to invest in the S&P 500 index? Here’s everything you need to know about investing in America’s most popular index from the UK.

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The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

If you’re wondering how to invest in the S&P 500 index, we’re going to explain everything you need to know. This has been a popular choice for investors for good reason, but how and where do you actually invest in it?

What is the S&P 500?

The Standard and Poor’s 500 (S&P 500) is a stock market index that includes 500 of the largest companies in the United States. Because it includes companies that span across most market sectors, it’s viewed as a good indicator of the greater U.S. stock market.

RELATED: How to Buy and Trade US Shares in the UK

Why invest in the S&P 500?

Investing in the S&P 500 index means that you can own shares in some of the best companies in America with just one investment.

Here are three great reasons for investing in the S&P 500:

1. Simple and cheap

Investing in the whole index is straightforward. Also, it usually means ongoing fees are low because it is not an actively managed fund.

2. Diverse selection of companies

Choosing this whole index will give you a lot more diversification than if you were to just pick a handful of US companies to invest in.

3. Track record of great performance

Prior to the outlier downturn in 2022, the historical returns of the S&P 500 have averaged about 9% per year. This is obviously a very tasty return, but keep in mind that past performance may not lead to similar future results. As we’ve seen this year, the stock market is volatile and affects indexes all over the world.

It’s important to remember that S&P 500 funds should be tracking the same index. This means that any difference in returns should be marginal.

Nevertheless, some are cheaper than others and there are a few that tend to be very popular amongst investors, such as:

  • iShares Core S&P 500 UCITS ETF
  • Vanguard S&P 500 UCITS ETF
  • Invesco S&P 500 UCITS ETF

Bear in mind that some investment companies might call their fund something like ‘The America 500’ fund. This is to avoid paying licensing fees and keep their costs down. Although these can be the same as ‘official’ S&P 500 index funds, it’s always worth double-checking exactly what’s in the fund you’re buying.

Where can I invest in the S&P 500?

Common ways to invest in this popular index are:

The cheapest way is to do it yourself through a platform. This will be the preferable option for most people because it is quite a simple investment to purchase and manage.

An investing solutions provider may be difficult to organise because they choose the investments and a financial adviser is likely to be more expensive with no real added benefit.

What is the best way to invest in the S&P 500?

The most common way to invest in this index is through a fund.

Investing in an S&P 500 index fund isn’t really something that needs a lot of maintenance because it should all be arranged automatically. So it’s definitely an investment you can manage yourself. Your only options are to buy or sell the fund.

This is usually done as an exchange-traded fund (ETF). An ETF just means that the fund is available on multiple platforms and exchanges.

How you invest in the S&P 500 will be very similar across all platforms. So it’s important that you aim for a fund with low fees. All platforms should contain the same companies.

How do I invest in the S&P 500 in the UK?

There are three simple steps to follow to get your investment up and running:

1. Research which fund you want to buy and check the cost. This is sometimes called the total expense ratio (TER) and will be shown as a percentage.

2. Find a share dealing platform that has the fund and open an account. Ideally, you want to use a stocks and shares ISA to shield your S&P 500 investment from tax.

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3. Deposit money into your account and purchase the fund. Most platforms should allow you to use a lump-sum or invest a regular monthly amount to dollar-cost-average.

Please note that tax treatment depends on the specific circumstances of the individual and may be subject to change in the future.

Should I invest in the S&P 500?

If you want a straightforward low-cost investment that gives you access to some of America’s best companies, then this might be a great pick. The whole index contains companies of different sizes from various industries. Which is what you want in a diversified portfolio.

However, although you get some diversification, it is heavily reliant on the US. Many of the companies will operate internationally but are still influenced by what happens in America. What happens with the dollar or politics can really impact the S&P 500.

Because the index is weighted by market capitalisation, most of your investment goes to the biggest companies. This can work against you sometimes as these large companies have already seen a lot of growth. Meanwhile, the smaller cap companies can see bigger gains.