How to invest in the S&P 500

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Originally published at: https://blog.investengine.com/how-to-invest-in-the-sp-500/

Estimated read time: 5 minutes

The S&P 500 is one of the most popular ways to invest in the US stock market, and with good reason. It includes some of the world’s most valuable and well-known companies, from Apple and Amazon to Microsoft and Meta.

But how do you invest in the S&P 500 if you’re based in the UK? In this guide, we’ll walk you through what the index is, how to invest in it using low-cost ETFs, and how to do it tax efficiently with InvestEngine.

What is the S&P 500?

The S&P 500 is a US stock market index made up of 500 of the largest publicly listed companies in the United States. It covers around 80% of the total US stock market and is widely seen as a barometer of the American economy.

The index includes global giants across a broad range of sectors:

  • Technology – Apple, Microsoft, Nvidia
  • Healthcare – Johnson & Johnson, Pfizer
  • Financials – JPMorgan Chase, Bank of America
  • Consumer goods – Coca-Cola, Procter & Gamble

Because of this broad mix, the S&P 500 offers effective diversification across industries if not geographies. 

It has, also, historically boasted strong returns over long periods too. The average annual return of the S&P 500 since its inception in 1957 is 10.33% – or 6.47% when adjusted for inflation. 

Of course, it’s important to remember that past performance is not indicative of future returns.

Why UK investors choose the S&P 500

The S&P 500 has been a popular index for investors since its creation. There are a number of reasons for this – US economic power being one of them. 

Many UK investors look to the S&P 500 as a way to:

  • Access high-growth sectors such as tech and biotech
  • Diversify beyond the UK market, which is smaller and more focused on sectors like finance and energy
  • Take a passive investing approach with low-cost ETFs that track the index
  • Build long-term growth in their ISA, SIPP, or general investment account

Of course, investing always carries risk — but for those with a long-term horizon, the S&P 500 is a popular choice as part of a globally balanced portfolio.

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

You can’t invest directly into the S&P 500. You can, however, invest into an index fund or exchange-traded fund (ETF) that tracks the index. 

1. Invest via an S&P 500 ETF

One of the easiest and most cost-effective ways to invest in the S&P 500 is through an Exchange-Traded Fund (ETF) that tracks the index.

Some options include:

It’s important to remember that TER isn’t the only consideration to make when selecting an ETF, so do your research before jumping in. 

All of these ETFs are available on the InvestEngine platform — with no trading fees or platform charges for DIY investors (ETF costs still apply).

2. Choose your investment account

Choosing your account type is an important decision for anyone looking to invest. Depending on your goals, you can hold your ETF in:

  • A GIA (General Investment Account) – Flexible, with no limits, though gains and dividends may be taxed above your allowances. Ideal for anyone who has maxed out their ISA allowance already.

Want to invest through your company? Our Business Account also supports ETFs tracking all major markets.

We compare ISAs and SIPPs in this article. They do different things but, for a lot of investors, one or both will be sufficient. 

3. Invest regularly or as a lump sum

Watch our video explainer to learn more about how investing regularly compares to investing a lump sum. 

In summary, you can invest:

  • As a lump sum — ideal if you’ve got savings ready to go and want to avoid high inflation
  • With a Savings Plan — set up automated weekly, fortnightly, or monthly contributions from as little as £20 to keep your portfolio ticking

InvestEngine’s Savings Plans mean you can set an investing schedule and sit back and relax. Simply choose when, how often and how much you want to invest – we’ll do the rest.

Paired with AutoInvest and fractional investing, your money is invested instantly and automatically – no manual trades needed.

What to watch out for

While S&P 500 ETFs are a straightforward way to access the US market, there are a few things to be aware of:

Currency risk

These ETFs are priced in US dollars. If the pound strengthens against the dollar, it can reduce your returns (and vice versa). You’re not just exposed to the index, but to exchange rate fluctuations too.

Volatility

The S&P 500 can rise – and fall – quickly. Like any stock market investment, it’s important to take a long-term view and avoid reacting to short-term noise. Investing isn’t a one-way journey to gains, there will be ups and downs along the way. 

Overconcentration

Though S&P 500 ETFs tend to be reasonably diversified, they’re obviously limited to the US. They also often have a significant portion allocated to tech. These can be concentration risks under some circumstances. 

Why use InvestEngine to invest in the S&P 500?

With InvestEngine, you get:

  • Commission-free investing – No trading or platform fees for DIY portfolios
  • Wide ETF choice – Including a range of major S&P 500 ETFs and other popular indices
  • Flexible accounts – ISA, SIPP, GIA, or Business Accounts for all your investing needs
  • Regular investing tools – Set up automated contributions with Savings Plans

Whether you’re building your retirement pot or investing for the long term, we make it simple, cost-effective and tax efficient.

Final thoughts

The S&P 500 is one of the most widely followed indices in the world. It’s a great way for investors to gain exposure to some of the most influential companies on the planet.

With a low-cost ETF, you can access this market easily and efficiently – particularly when investing through an ISA or SIPP.

Just remember: it’s important to think about how US exposure fits within your broader investment strategy. Diversification is key — and combining the S&P 500 with UK, European or global ETFs, for example, can help investors spread risk.

Important information

Capital at risk. The value of your portfolio with InvestEngine can go down as well as up and you may get back less than you invest. ETF costs also apply.

This communication is provided for general information only and should not be construed as advice. If in doubt you may wish to consult a professional adviser for guidance.

Tax treatment depends on personal circumstances and is subject to change, and past performance is not a reliable indicator of future returns.