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How to invest in the S&P 500 from Canada

Toni Nasr, CFA, FRM| Updated January 26th, 2024

Investing in the S&P 500, one of the world’s most renowned stock market indices has long been a popular choice for investors seeking exposure to the US equities market. However, if you are based in Canada, you might be wondering how to gain access to this investment and what is the best approach to invest in the S&P 500 from Canada.

In this comprehensive guide, we will provide you with a step-by-step process for buying the S&P 500 from Canada. We will cover important aspects such as choosing a suitable S&P 500 ETF, offering tips for selecting an ETF broker, and more!

How to buy the S&P 500 from Canada (Step-by-step guide)

1. Pick an ETF tracking the S&P 500

The S&P 500 measures the performance of 500 large-cap US companies. These companies span various sectors and are considered representative of the overall US equity market. As such, investing in the S&P 500 exposes you to a broad range of companies and can serve as a cornerstone of a diversified investment portfolio.

When it comes to investing in the S&P 500 from Canada, it will be costly and inefficient for individual investors to attempt to invest in each of these 500 companies separately. However, Exchange-Traded Funds (ETFs) offer a practical solution by providing a single investment vehicle representing the entire index’s performance. By investing in S&P 500 ETFs, Canadian investors can effectively participate in the potential growth of the index and enjoy the benefits of diversification.

The table below shows the five biggest S&P 500 ETFs available to Canadian investors. This list was already filtered using TMX Money, a site that can help you easily find and compare ETFs listed on the Toronto Stock Exchange (TSE).

5 Biggest S&P 500 ETFs in Canada

Name ISIN Ticker* Annual fee (TER) Replication method Use of income Fund size (in $B)
BMO S&P 500 Index ETF CA05575T1003 ZSP 0.09% Physical Distributing 14+
iShares Core S&P 500 Index ETF (CAD-Hedged) CA46428J1057 XSP 0.10% Physical Distributing 9+
Vanguard S&P 500 Index ETF CA92205Y1051 VFV 0.08% Physical Distributing 7+
iShares Core S&P 500 Index ETF CA46434R1091 XUS 0.10% Physical Distributing 4+
Horizons S&P 500 Index ETF CA44056A1084 HXS 0.10% Synthetic Accumulating 2+

*Each fund provider offers a variety of ETFs that track the S&P 500. We have chosen one ETF from each provider to simplify the analysis in this guide. However, we encourage you to visit TMX Money, where you can explore and evaluate all the available ETF options. 

Don’t worry if you are not familiar with what the “Replication method” and “Use of income” mean; we’ll explain them later in this guide. Now, let’s move to the second step on how to buy the S&P 500 from Canada.

2. Choose a good ETF broker

After selecting an ETF, the next step is to identify a reliable broker to let you invest in it. To do this, we’ll briefly summarize what each broker offers on their platforms. 

Broker/ETF Ticker ZSP XSP VFV XUS HXS
Interactive Brokers ✔​ ✔​ ✔​ ✔​ ✔​
QTrade ✔​ ✔​ ✔​ ✔​ ✔​
WealthSimple ✔​ ✔​ ✔​ ✔​ ✔​
Questrade ✔​ ✔​ ✔​ ✔​ ✔​
Saxo Bank ✔​ ✔​ ✔​ ✔​

Other important factors to consider when selecting an ETF broker are the fees, minimum deposit requirements, the range of available ETFs, and if they offer tax-free investment accounts. Here is a summary of these factors for each broker:

Broker ETF Transaction Fees Min. deposit Number of ETFs Tax-free investment account
Interactive Brokers Varies by exchange with tiered pricing: Between $0.0005 and $0.0035 per ETF share CAD 0 13,000+ Yes
QTrade Zero commission on 100+ ETFs, other ETFs between $6.95 and $8.75 CAD 0 100+ Yes
WealthSimple CAD 0 CAD 0 Not disclosed* Yes
Questrade When selling: 1¢ per ETF share (min. CAD 4.95 to 9.95) CAD 1,000 1,800+ Yes
Saxo Bank Varies by exchange and account type: Between 0.03% and 0.08% (min. CAD 5) $2,000 6,900+ No

* Although the number of ETFs is not disclosed, we were able to find all the ETFs suitable for Canadian investors.

3. Place a “Buy Order”

Once you have chosen a suitable ETF broker and funded your account, you are ready to place a “Buy Order” for the S&P 500 ETF. For this example, we will use Interactive Brokers. However, you can follow these steps to execute your purchase with any broker:

a) Search for the desired S&P 500 ETF

Use the search function or browse through the available ETFs to find the specific S&P 500 ETF you have selected. Refer to the ticker symbol to locate the ETF accurately (in our case, we searched for ZSP).

Interactive Brokers Client Portal

You may come across instances where the broker offers multiple versions of the same ETF, denominated in different currencies such as USD, EUR, or CAD. It is advisable to select the ETF that aligns with your account currency. For example, as a Canadian investor with a CAD-denominated account, choosing a CAD ETF will help you avoid currency exchange fees.

b) Click on “Buy” or “Invest”

Usually, this tab is clear once you are on the ETF page, where you will find the chart and key information about the ETF.

Interactive Brokers Instrument Dashboard

c) Choose the order details

Now, you must choose the appropriate order type based on your preferences and trading strategy.

  • Limit Order: It is set by default on IBKR. So you can set a specific price at which you are willing to buy the ETF. The trade will only be executed if the market price reaches or falls below your specified limit price.
  • Market or Trader Order: This order executes the trade at the prevailing market price and provides immediate execution.
  • Amount or Units: Specify the amount of money or the number of shares you wish to invest in the S&P 500 ETF.

IBKR order details window

d) Place the order

Finally, click “Submit But Order” to submit your order. At this point, the broker will process the transaction and attempt to execute the trade at the specified parameters.

What to look for in any ETF?

Not all ETFs are the same, and it’s important to consider several factors before deciding. Here are some factors to consider:

1. Fees (TER)

Different asset managers charge varying fees for their ETFs. For instance, providers like BlackRock (iShares) and Vanguard charge a small annual fee which is subtracted from the fund’s assets directly. As such, choosing an ETF with lower fees can result in higher returns on your investments. Ongoing charge (OCF) or total expense ratio (TER) are standard terms to describe this overall management fee.

2. Replication method

ETFs can employ two different replication methods:

  • Physical replication, which involves purchasing the actual assets outlined in the index,
  • Synthetic replication, where the fund manager utilizes financial derivatives to mirror index performance.

Additionally, you might encounter some ETFs that combine both approaches. Given the high liquidity of the S&P 500’s underlying companies, physical replication is often preferred due to its lower costs and reduced risks associated with derivatives.

3. Use of Income

ETFs also differ in how they handle income generated by the underlying companies.

  • Accumulating ETFs reinvest dividends received from the companies included in the index, leading to a higher ETF price. You won’t need to pay transaction fees or trading costs for dividend reinvestment, as it is done automatically. 
  • Distributing ETFs, on the other hand, provide regular dividend payments directly to your brokerage account, requiring you to declare the received dividends.

Ultimately, deciding between accumulating and distributing ETFs depends on your circumstances and investment strategy. Assess your long-term goals and income requirements to select the best option for your needs. For instance, if you plan to hold your investment for a relatively long period without the need for regular income, an accumulating ETF may be more suitable. However, if you aim to earn regular income from your investment, a distributing ETF would be a better choice. As for taxes, in Canada, distributions by ETFs are generally taxed in the year they are received, which means that holdings in an accumulation fund may still be subject to dividend tax. However, consulting with a tax advisor or professional for personalized advice on tax matters is advisable. Additionally, when you sell your holdings, you may be liable to pay capital gains taxes based on the type of account you have.

4. Size

Consider the overall fund size when selecting an ETF. Larger funds generally carry a lower risk of liquidation compared to smaller ones. In the event of liquidation, a fund sells its holdings, settles obligations, and distributes the remaining funds to investors.

5. Hedging

Some ETFs employ hedging strategies using financial derivatives to mitigate currency fluctuations. This comes at an additional cost but might protect you against large currency swings. Most of the ETFs mentioned earlier are “unhedged,” except XSP, as we believe that currency fluctuations tend to balance out over the long term.

The Bottom Line

In conclusion, investing in the S&P 500 from Canada is a popular option for individuals seeking exposure to the US stock market. Here’s a summary of the steps to follow:

  1. Pick an ETF tracking the S&P 500: Look for ETFs such as ZSP and VFV, which offer competitive management fees and are listed on multiple exchanges in different currencies. This allows you to bypass potential broker-related forex fees by purchasing in your local currency;
  2. Find a suitable broker: Choosing a reliable ETF broker is crucial for investing in the S&P 500. Consider factors such as the number of available ETFs, fees, and the minimum deposit. Here’s a list of brokers that are giving free stocks, trades, and cash in Canada for your reference;
  3. Open an account and deposit money: After deciding which trading platform to use, you must go through the account opening process and deposit money;
  4. Send a buy order to your broker for the picked ETF: Sending a buy order to your broker is a straightforward and intuitive process. Just fill in the required fields to execute the trade!

We hope this guide has addressed your concerns and provided valuable insights. Remember to conduct thorough research to determine the best investment strategy for your needs.

Happy investing!

Other FAQs

What is the S&P 500?

The S&P 500 is a widely recognized stock market index that tracks the performance of 500 large-cap U.S. companies.

Why would someone in Canada want to invest in the S&P 500?

Investing in the S&P 500 allows Canadian investors to gain exposure to the US market and potentially benefit from its long-term growth.

Which brokers in Canada offer access to S&P 500 ETFs?

Several brokers in Canada offer access to S&P 500 ETFs, including popular platforms like Interactive Brokers, Wealthsimple, Questrade, Saxo Bank, and QTrade.

Can I hold S&P 500 ETFs in tax-efficient accounts such as TFSA, RESP, or RRSP?

Some brokers allow holding S&P 500 ETFs in tax-efficient accounts like TFSA, RESP, or RRSP, providing potential tax advantages.

What is an Exchange Traded Fund (ETF)?

An Exchange Traded Fund (ETF) is a type of investment fund traded on stock exchanges. It is designed to track the performance of a specific index, commodity, sector, or asset class. If you invest in an S&P 500 ETF, you will gain exposure to the performance of over 500 different companies without the need to invest in each individual company separately. This provides a convenient and efficient way to diversify your investment across a wide range of holdings within the index.

What are CFDs? Should I invest in S&P500 CFDs?

Contracts for Difference (CFDs) are derivative financial instruments that allow traders to speculate on the price movements of an underlying asset without actually owning the asset itself. Investing in S&P 500 CFDs involves trading based on the price fluctuations of the S&P 500 index. To learn more about it, read our article: CFDs vs Shares: Understand the Differences.

Toni Nasr, CFA, FRM
Fintech Analyst

Toni is a Fintech Analyst with over 8 years of experience in the financial industry where he worked as a financial control analyst at a regional bank and later conducted independent investment research analysis.

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