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

Toni Nasr, CFA, FRM| Updated February 29th, 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 the UK, 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 the UK.

In this comprehensive guide, we will provide you with a step-by-step process for buying the S&P 500 from the UK. 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 the UK (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 represent 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 the UK, 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 that represents the performance of the entire index. By investing in S&P 500 ETFs, UK 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 British investors. This list was already filtered by using justETF, which is a site that can help you easily find and compare ETFs.

5 Biggest S&P 500 ETFs in the UK

Name ISIN Ticker* Annual fee (TER) Replication method Use of income Fund size (in m £)
iShares Core S&P 500 UCITS ETF IE00B5BMR087 CSP1 0.07% Physical Accumulating 56+
Vanguard S&P 500 UCITS ETF IE00B3XXRP09 VUSA 0.07% Physical Distributing 30+
Invesco S&P 500 UCITS ETF IE00B3YCGJ38 SPXP 0.05% Synthetic Accumulating 13+
iShares Core S&P 500 UCITS ETF IE0031442068 IUSA 0.07% Physical Distributing 12+
Vanguard S&P 500 UCITS ETF IE00BFMXXD54 VUAG 0.07% Physical Accumulating 6+

*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 justetf.com, where you can explore and evaluate all the available ETF options.

Don’t worry if you are unfamiliar 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 the UK.

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 provide a brief summary of what each broker offers on their platforms.

Broker/ETF Ticker CSP1 VUSA SPXP SPY5 HSPX
InvestEngine ✔​ ✔​ ✔​ ✔​
Interactive Brokers ✔​ ✔​ ✔​ ✔​ ✔​
eToro ✔​ ✔​
Freetrade ✔​ ✔​ ✔​ ✔​
Trading 212 ✔​ ✔​ ✔​ ✔​ ✔​
Hargreaves Lansdown ✔​ ✔​ ✔​ ✔​ ✔​

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 ISA accounts. Here is a summary of these factors for each broker:

Broker ETF Transaction Fees Min. deposit Number of ETFs ISA Availability
InvestEngine £0 £100 550+ Yes
Interactive Brokers Varies by exchange with tiered pricing: Between $0.0005 and $0.0035 per ETF share £0 13,000+ Yes
eToro $0 $100 400+ Yes (Through MoneyFarm)
Freetrade £0 £0 6,000+* Yes
Trading 212 £0 £1 12,000+* Yes
Hargreaves Lansdown £0 £0 3,000+ Yes

*Includes shares and ETFs

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 eToro. 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 CSP1).

eToro Search Bar

You may come across instances where the broker offers multiple versions of the same ETF, denominated in different currencies such as USD, EUR, or GBP. It is advisable to select the ETF that aligns with your account currency. For example, as a British investor with a GBP-denominated account, choosing a GBP ETF will help you avoid currency exchange fees. However, with eToro, only USD is available as the account currency, so this consideration may not apply in their case.

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.

eToro’s Instrument Dashboard

c) Choose the order details

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

  • Market or Trader Order: It is set by default on eToro, where it executes the trade at the prevailing market price and provides immediate execution.
  • Limit Order: 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.
  • Amount or Units: Specify the amount of money or the number of shares you wish to invest in the S&P 500 ETF.

d) Place the order

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

eToro’s order execution window

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 utilises 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. As for taxes, in the UK, dividend income gains are taxed regardless of whether they are distributed, so holdings in an accumulation fund may still be subject to dividend tax,
  • 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 with 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.

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. Our top 5 ETFs mentioned earlier are all “unhedged,” 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 the UK 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 VUSA and CSP1, 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 our list of the top ETF platforms in the UK 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 the UK want to invest in the S&P 500?

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

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

Several brokers in the UK offer access to S&P 500 ETFs, including popular platforms like eToro, InvestEngine, and Interactive Brokers.

Can I hold S&P 500 ETFs in tax-efficient accounts such as ISAs or SIPPs?

Some brokers allow holding S&P 500 ETFs in tax-efficient accounts like ISAs or SIPPs, 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 know more about it, you can read our article: CFDs vs Shares: Understand the Differences and check our list of the top CFD brokers in the UK.

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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