How to invest in the S&P 500 on DEGIRO

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 five of the S&P 500 ETFs available on DEGIRO (to see every S&P 500 ETF available to European investors, some of which may not be on DEGIRO, go to justETF.com). We believe this list is enough for you to consider:

We would recommend one of the first two (iShares or Vanguard) for these reasons:

1. Both have a total expense ratio (TER) of 0.07%, which is very low. €100 invested in either ETF costs you only 7 cents a year. The SPDR ETF is even cheaper at 0.03%, and is a good alternative if you prefer a distributing fund.
2. The replication method is “Physical“, meaning the fund holds the shares in the index. A “synthetic” ETF uses a swap (a derivative contract with a bank) to deliver the index return, which adds counterparty risk.
3. These two are the biggest S&P 500 ETFs in Europe by assets under management (AUM), which makes a closure very unlikely.
4. All of the first four are in the DEGIRO ETF Core Selection, so you pay only €1 per trade when you buy them on the Tradegate exchange, regardless of the amount invested.

A note on synthetic ETFs: because a swap-based S&P 500 ETF does not hold US shares directly, it can avoid the 15% US withholding tax that physical Irish-domiciled funds pay on dividends. That is why the Invesco ETF has historically tracked the index closely despite using derivatives. It is a valid choice if you are comfortable with the swap structure.

Still, if you want to explore more S&P 500 ETFs, go to the DEGIRO search bar and write “S&P 500”:

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 Euronext Amsterdam (“EAM”) and the London Stock Exchange (“LSE”), 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. This means that if you are a European-based investor, you should go for a EUR version. Why? Because you will not be charged unnecessary currency conversion fees. For the €1 Core Selection fee, choose the Tradegate listing, which is also quoted in EUR.

Place a “Buy Order”

So, let’s say you have decided to invest in iShares Core S&P 500 UCITS ETF (SXR8). The process is the same for the other ETFs.

• Search for the chosen ETF using the ticker symbol:

• Click “B” (stands for “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:

We recommend setting a limit price in the order type to make sure you will not pay more than expected. Let’s look at the image again. The ETF is trading at €541.68. If you set a limit order at €541, you will pay at most that price, and the order only executes if the ETF trades at that level.

On the other hand, if you give a market order, the purchase price can be higher than €541.68, as the order executes at the best price available when it reaches the market.

• Click “Place Order”: All the details will appear (including the costs), and you are ready to trade by selecting “confirm”:

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

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

By purchasing an S&P 500 ETF, you will incur several fees. According to the DEGIRO fees page (Ireland), these are the charges:

• ETF Core Selection: €0 commission plus a €1 handling fee, so €1 per trade, for ETFs bought on the Tradegate exchange.
• Other ETFs and exchanges: €2 commission plus the €1 handling fee, so €3 per trade.
• Connectivity fee: 0.25% of your account value, capped at €2.50 per calendar year for each exchange outside your home market on which you trade or hold positions.
• Currency conversion (AutoFX): 0.25% of the trade value if you buy an ETF quoted in a currency different from your account currency.
• Account fees: no custody, inactivity, deposit or withdrawal fees.

Fees can differ slightly by country, so check the DEGIRO fee schedule for your country of residence. Buying a Core Selection ETF on Tradegate in EUR keeps the cost to €1 per trade, plus the connectivity fee for that exchange.

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, consequently, higher returns on your investment. 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, or CSPX) as an example, you can check its TER of 0.07% in the 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 companies in the S&P 500 are very liquid, so physical replication is easy to achieve and avoids the counterparty risk of derivatives. Synthetic replication has a tax advantage on US dividends, as explained above. 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 for the ETF compared with 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 give 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 keep your investment for 20 years? 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.

In the factsheet below, SXR8 had net assets of about $136 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 ETFs in our table are all “unhedged”, since we believe that over the long term currency fluctuations tend to even out.

Bottom line

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

1. Pick an ETF tracking the S&P 500: choose one of the UCITS ETFs above, ideally a Core Selection ETF on Tradegate.
2. Open an account and deposit money into DEGIRO: after deciding which trading platform to use, you must go through the account opening process and deposit money.
3. Send a buy order 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!

Alternatively to DEGIRO, you can also check out other trading platforms. You can get more information here on how to invest in S&P500 on Revolut, or on other providers such as Trading 212 or XTB.