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How to invest in the S&P 500 from Europe

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Fact checked by
Pedro Braz
Updated
Jul 15, 2024

After delivering stellar annualized returns of over 10% in the last 30 years, the S&P 500 has earned itself a name. It has outperformed the major European indices during this period, leading to many Europeans asking themselves how to invest in the S&P 500. 

In this article, we’ll delve into how to buy the S&P 500 from Europe, including how to choose a good S&P 500 ETF, compare the leading ETF investment platforms such as eToro, mistakes to avoid, and more!

1. Pick an ETF tracking the S&P 500

The S&P 500 consists of the leading 500 publicly traded US businesses. It includes large well, known companies like Apple, Amazon, and Microsoft, to name a few. It is, however, impossible to directly buy the S&P 500 index. What you can do is invest in the S&P 500 through an instrument replicating every movement of the S&P 500, like an Exchange Traded Fund (ETF).

The table below shows five of the biggest S&P 500 ETFs available to Europeans. This list was already filtered by using justETF, which is a site that can help you easily find and compare ETFs.

Name ISIN Ticker* Annual fee (TER) Replication method Use of income Fund size (€ billion)
iShares Core S&P 500 UCITS ETF IE00B5BMR087 CSPX 0.07% Physical Accumulating 66+
Vanguard S&P 500 UCITS ETF IE00B3XXRP09 VUSA 0.07% Physical Distributing 30+
Invesco S&P 500 UCITS ETF IE00B3YCGJ38 SPXS 0.05% Synthetic Accumulating 16+
SPDR® S&P® 500 UCITS ETF IE00B6YX5C33 SPY5 0.03% Physical Distribution 8+
Xtrackers S&P 500 Swap UCITS ETF LU0490618542 XSPX 0.15% Synthetic Accumulating 3.5+

Note that the only S&P 500 funds available to Europeans are UCITS compliant.

Each ETF has different tickers. We decided to choose one of them and analyse it for simplicity reasons. Nonetheless, we encourage you to go to justetf.com, search for each ETF using the ISIN code, select it and look for the tab “Stock exchange”. There, all tickers will be presented.

Below, we explore in greater detail what the “Replication method” and “Use of income” mean.

2. Choose a good ETF broker

Having selected one of the above ETFs, you need to find a broker where you can actually invest in it! To accomplish this, we have summarised what each broker offers in their platforms:

Broker/ETF Ticker CSPX VUSA SPXS XSPX SPY5
eToro
Interactive Brokers
DEGIRO
XTB*

XTB only offers real ETFs in some countries, including the Czech Republic, France, Germany, Italy, Poland, Portugal, Romania, Slovakia, Spain, South America, UAE and the UK.

And obviously, not less important are the fees, the minimum deposit, the overall number of ETFs provided, and the regulators. Our summary:

Broker ETF Fees Min. deposit Number of ETFs Regulators
eToro $0 (other fees apply) $50 (varies between countries) 300+ FCA, CySEC, ASIC
Interactive Brokers Tiered Pricing (varies by exchange): 0.05% of Trade Value (min: €1.25, max: €29.00) €/$/£0 13,000+ FINRA, SIPC, SEC, CFTC, IIROC, FCA, CBI, AFSL, SFC, SEBI, MAS, MNB
DEGIRO £/€0 (in some ETFs + €/£1 handling fee), plus an annual £/€2.50 connectivity fee €/£1 200+ DNB and AFM
XTB $/€/£0 €/$/£1 100+ FCA, KNF, CySEC, DFSA and FSC

3. Place a “Buy Order” (in eToro)

If you have found an online broker that suits your needs, managed to open an investment account, and made the initial deposit, you are all set to buy one of the ETFs replicating the S&P 500! All you have to do is find the ETF within your chosen broker and place a buy order.

For this example, we will use eToro (below, we will use DEGIRO):

  • Search for the chosen ETF (we will use “SPY5”):
eToro's search bar - SPY5
  • Click “Trade”: After clicking trade, all you need to do is choose the amount you wish to invest ($11 in our case). Make sure to only use “x1” leverage. If you use more leverage, you will be investing in a derivative product (a CFD), with higher risk, fees, and not owning the underlying product.
eToro's dashboard & place order - SPY5
  • Click “Buy”: And that’s it! You will receive a pop-up stating “order filled” which means you are invested in the S&P 500!
eToro order filled - SPY5

eToro offers commission-free trading in ETFs (and stocks – other fees apply) and has a modern and easy to use platform. You can place your trade both on your PC or through eToro’s mobile app.

One thing to note is that some of the S&P 500 ETFs offered on eToro are US ETFs (not available in Europe), and for that reason, they are offered as CFDs (just to be clear: not the case with SPY5). You need to ensure that you are buying the real product (not CFD), since CFDs are different instruments, with other fees, and no asset ownership (you are not the ETF beneficial owner).

Check the example mentioned below of VOO, which you should avoid since it is offered through a CFD:

VOO ETF (CFD)

4. Place a “Buy Order” (in DEGIRO)

Within DEGIRO, you have a wider diversity of ETFs replicating the S&P 500. For our study, let’s use the iShares Core S&P 500 UCITS ETF (CSPX):

  • Search for CSPX (quoted in euros in the Euronext Amsterdam – EAM):
DEGIRO's search bar - CSPX
  • Click “B” (buy): A new window will appear on the right side of your screen with all the details you need to fulfil: the order type (limit price in this case) and the number of shares you want to buy.
DEGIRO's place order
  • Click “Place Order”: All the details will appear (including the costs) and you are ready to trade by selecting “confirm”:
DEGIRO order confirmation

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 will mean lower costs for you and, consequently, higher returns on our investments. 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 (CSPX) as an example, you can check its TER of 0.07% in the factsheet:

iShares Core S&P 500 UCITS ETF - April factsheet

2. Replication method

It 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 underlying companies comprising the S&P 500 are very liquid, and thus physical replication is preferred as it does not incur any additional costs or risks related to derivatives. Using the CSPX again, you can see its methodology as “Physical Replication”:

iShares Core S&P 500 UCITS ETF - April factsheet

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 will dictate a higher price for the ETF when compared to an identical distributing ETF, and, in some countries, it is tax advantageous because since the dividends are kept inside the ETF, you are not required to declare that amount;
  • 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 CSPX is “Accumulating”:

iShares Core S&P 500 UCITS ETF - April factsheet

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.

The CSPX has a net asset value of $79,985.41 million:

iShares Core S&P 500 UCITS ETF - April factsheet

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. Our top 5 ETFs are all “unhedged” since we believe that over the long-term, currency fluctuations offset each other over time.

Bottom line

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

  1. Pick an ETF tracking the S&P 500: Find an ETF tracking that index. Both VUSA and CSPX stand out due to their competitive management fees and being listed on multiple exchanges in different currencies (this can help us circumvent potential broker-related forex fees as we can buy in our local currency).

  2. Find a suitable broker: Finding a good ETF broker is essential when you want to invest in the S&P 500. You must consider the number of ETFs you will get access to, the fees you’ll incur, which regulatory body supervises the broker, etc.

  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: That’s the easiest part (the process is intuitive)! After having your brokerage account and the name of the ETF that you want to buy, you just have to place a trade!

We hope that this post addressed some of your concerns. Make sure to do your own research to find out the best investing strategy for you!

FAQs

What is the S&P500?

The S&P 500 is an index tracking the leading 500 companies in the United States. It is calculated from the included companies’ share prices. The index includes large well known companies such as Apple, Amazon, and Microsoft.

What is an Exchange Traded Fund (ETF)?

An ETF is a publicly traded fund that holds assets like stocks. When you invest in an ETF, you indirectly buy a large portfolio of assets. In the case of an S&P 500 ETF that means it will track the performance of underlying holdings used in the index. That would mean you can easily gain exposure to over 500 different companies with just a single investment!

Is it possible to invest directly in the S&P 500?

No, an index is a measure of the performance of a theoretical portfolio, meaning that it is just a representation. It thus is impossible to directly buy an index.

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

CFD stands for contract for difference and allows investors to bet on price movements (either up or down), oftentimes with ample leverage. It is not recommended for novice investors to trade complex financial products. More about it here.

Can Europeans invest in SPY or VOO?

No, Europeans cannot buy SPY or VOO from Europe due to PRIIPS. This article covers some alternatives available for EU investors.

Is now a good time to invest in the S&P 500 in Europe?

If anyone would know the future they would be rich. It is deemed impossible to predict short-term market movements, but history has shown that over a long time period, the stock market (or, more specifically, the S&P 500) tends to go up.

Why should I invest in the S&P 500 index from Europe?

The S&P 500 has historically performed significantly better than local indices in Europe. If an investor thinks this was to continue they should consider investing in the S&P 500 over local indices.

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About the author
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Franklin Silva
Co-Founder & Fintech Analyst

Franklin has three years of experience in Wealth Management as a Fund Research Analyst, has passed the CFA level II, and is the host of the "Edge Over Hedge" YouTube channel.

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