How to invest in the S&P 500 on Trading 212 (step-by-step)

Pick an ETF tracking the S&P 500

It is impossible to directly buy the S&P 500 index. However, you can invest in it through an instrument replicating every movement, like an Exchange-Traded Fund (ETF).

The table below shows four of the S&P 500 ETFs available on Trading 212. To see all the S&P 500 ETFs available to Europeans (some may not be on Trading 212), go to justETF.

The first two (iShares and Vanguard) are the most popular, for these reasons:

1. Both have a total expense ratio (TER) of 0.07%, which is very low: €100 invested in either would cost you 7 cents a year;
2. They use physical replication, meaning the fund holds the shares in the index. Synthetic ETFs, like the Invesco and Xtrackers ones, get the index return through a swap with a bank, which adds counterparty risk, although it can also reduce the tax withheld on US dividends;
3. They are the two largest S&P 500 ETFs in Europe by assets under management (AUM), which makes a closure very unlikely.

This information is not investment advice. Do your own research. To explore more S&P 500 ETFs, type “S&P 500” in the Trading 212 search bar:

Please keep in mind that the same ETF can be traded in different exchanges and in different currencies. For example, the Vanguard S&P 500 UCITS ETF is traded on the Euronext Amsterdam, and the London Stock Exchange, among others. You can check that in the orange rectangle:

As you can see, the ETF traded on “EAM” is quoted in EUR, whereas the ones traded on the “LSE” are quoted in USD or GBP. So, if your account is in euros, the EUR version avoids the currency conversion fee (0,15% FX fee applies when converting funds). The same can be said for a UK-based investor by choosing the GBP version.

Place a “Buy Order”

As an example, we use the iShares Core S&P 500 UCITS ETF (SXR8). The process is the same for the other ETFs.

• Search and select the chosen ETF using the ticker symbol

• Click “Buy”

A new window will appear with all the details you need to fill in. In our case, we used a “market order” and the value of our investment (€100). Instead of the amount, you can choose the number of shares you want to buy. Thanks to fractional shares, you can invest from €1.

• Review your order

Here, you will have a final look at your selected parameters:

• Order confirmation

In the top right corner, you will see your order confirmation:

And that’s it! You are invested in the S&P 500!

All the fees when buying an S&P 500 ETF on Trading 212

According to the Trading 212 Terms and Fees page, these are the main costs of buying an S&P 500 ETF:

If you buy an ETF in a currency other than your account currency, a currency conversion fee of 0.15% of the trade value applies. The TER is not paid to Trading 212: it is deducted by the fund manager from the fund’s assets and is already reflected in the ETF price.

Investing regularly with AutoInvest

If you want to invest a fixed amount every month, you can add your S&P 500 ETF to a Pie and set up AutoInvest, which schedules your deposits and invests them automatically according to your Pie. Pies & Autoinvest is an execution-only service. Not investment advice or portfolio management. Automatic investing refers to executing scheduled deposits. You are responsible for all investment and rebalancing decisions.

What to look for in any ETF?

Not all ETFs are created equal. Different asset managers provide different ETFs tracking the same indices (like the S&P 500). The main differences are:

1. Fees (TER)

Asset managers like BlackRock (iShares) or Vanguard do not offer ETFs for free as they incur costs as well. Throughout the year, a small fee is subtracted from the fund’s assets. A lower fee means lower costs for you and, all else equal, a higher net return. Asset managers often list the overall cost of the fund. Ongoing charge (OCF) or total expense ratio (TER) are standard terms for this overall management fee.

Using the iShares Core S&P 500 UCITS ETF (SXR8) as an example, you can check its TER of 0.07% in the factsheet:

2. Replication method

This can be done in two ways:

• Physical replication ETFs means the ETF will try to buy the underlying assets laid out in the index.
• Synthetic replication ETFs means that the ETF uses financial derivatives to replicate the performance of the index.

The companies in the S&P 500 are very liquid, so physical replication works well and avoids the counterparty risk of derivatives. Synthetic ETFs, on the other hand, can avoid part of the 15% US withholding tax on dividends that physical Irish ETFs pay, which is why some investors prefer them for the S&P 500. Using the same ETF, you can see its methodology as “Physical Replication”:

3. Use of Income

Apart from their product structure, the ETFs also distinguish between themselves in the following terms:

• Accumulating ETFs where the ETF reinvests the dividends it receives from the companies included in the index that decide to make that distribution. This leads to a higher price than an identical distributing ETF, and in some countries it is tax-efficient because dividends kept inside the ETF are not taxed until you sell;
• Distributing ETFs gives you on a regular basis (usually quarterly) the dividends that companies distribute. So, you will receive that amount directly in your brokerage account. Here, you will have to declare the dividends received.

Which one is better? There is no “correct” answer. It all comes down to your preferences. Do you plan to withdraw your investment in a 20-year time horizon? Maybe an accumulating ETF does a better job. Do you want to earn some regular income? Well, in that case, a distributing ETF will be the most appropriate choice.

The SXR8 is “Accumulating”:

4. Size

The overall fund size should also be taken into consideration. The size of an ETF can impact the likelihood of fund liquidation. Smaller funds generally run a higher risk of being liquidated than larger funds. In such a case, the fund will sell all its holdings, settle obligations and distribute the remainder to the fund holders.

At the time of the screenshot, the SXR8 had net assets of more than $135 billion:

5. Hedging

ETFs can use financial derivatives to protect against currency fluctuations. This comes at an additional cost but might protect you against large currency swings. The four ETFs in our table are all unhedged, which keeps costs lower, so their value in euros also moves with the EUR/USD exchange rate.

Bottom line

To sum it up, here’s what you need to do:

1. Pick an ETF tracking the S&P 500: compare fees, replication method, use of income and fund size.

2. Open an account and deposit money into Trading 212: go through the account opening process and fund your account.

3. Send a buy order for the ETF: search for the ticker, choose the amount and confirm the order.

Make sure to do your own research to find the investing strategy that suits you.

You can also check alternative platforms to invest on the US stock market. Read this guide on how to invest in S&P500 with Interactive Brokers (or this one on how to invest using eToro).