The S&P 500 is one of the most popular indexes available to investors, and you may already have some money working in one of these majestic funds.
But do you know which companies sit at the top of the fund, getting the bulk of your pounds? Read on to find the inside outs of one of the most popular investments in the world.
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How is an S&P 500 index fund organised?
Similar to FTSE 100 funds, most S&P 500 index funds are market-cap weighted. This just means that the companies with the largest market caps will attract more of your money. You can think of it like the rule in physics that objects with a larger mass have a greater gravitational pull.
Like anything, this has upsides and downsides:
- Key benefit: most of your money goes to the biggest and most established companies like ‘blue-chip stocks’, which can be more secure.
- Main drawback: only a small portion of your investment will go to the smaller companies that may have more potential to grow.
What are the top holdings in an S&P 500 index fund?
Right now, here’s what the iShares Core S&P 500 UCITS ETF looks like in terms of biggest positions. I’ve also included the rough percentage of your investment each company will get (known as the weight):
| Position | Company | Weight |
| 1 | Microsoft (MSFT) | 6.35% |
| 2 | Apple (APPL) | 5.91% |
| 3 | Amazon.com (AMZN) | 3.86% |
| 4 | Alphabet Class A (GOOGL) | 2.25% |
| 5 | Alphabet Class C (GOOGL) | 2.12% |
| 6 | Tesla (TSLA) | 2.11% |
| 7 | Meta Platforms (FB) | 2.04% |
| 8 | NVIDIA (NVDA) | 1.9% |
| 9 | Berkshire Hathaway Class B (BRK.B) | 1.33% |
| 10 | JPMorgan Chase & Co. (JPM) | 1.25% |
How much of your investment goes to the top companies?
Based on the current structure, 29.12% of any investment you make goes to the top ten firms.
So, if you were to put £100 into this S&P 500 index fund, then around £29 would go to these top dogs and the leftover £71 of your investment would be spread amongst the remaining 490 companies!
This top-heavy nature is one of the risks of passive investing that you should consider.
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Is the S&P 500 index a good investment?
As you can see from these holdings, the top of the S&P 500 is very tech-heavy. This is simply because technology companies have been the fastest-growing and most profitable firms in recent years. The index looked quite different 20 years ago, but it still performed well before the Silicon Valley tech takeover.
The US is facing increasing competition from countries like China. So, there’s no guarantee that the American economy will remain on top after such a long run. As Arnold Schwarzenegger wisely says, “the wolf on the hill is not as hungry as the wolf climbing the hill”.
How do you start investing in the S&P 500?
We’ve got a great guide on how to invest in the S&P 500 to help you out. One of the key things to do is to make sure you pick a fund with a low expense ratio (cost). Most of these index funds are exactly the same, so there’s no need to pay more in fees.
Most top-rated share dealing platforms should give you access to a range of ETFs like this. It’s also worth using a stocks and shares ISA account to hold your investments because this will mean you don’t have to pay any tax on gains.
Funds like this are a great way to get a simple and diversified investment. But there are still risks involved and it’s important to understand that past performance doesn’t dictate future results and that you may get out less than you put in.
