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How to invest in the S&P 500 from Europe

Pedro Braz| Updated January 5th, 2023

After delivering stellar annualized returns of over 10% in the last 30 years, the S&P 500 has earned itself a name. The S&P 500 has outperformed European indices during this period. This led 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, tips for choosing an ETF broker, and more!

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

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 the five biggest S&P 500 ETFs available to Europeans. This list was already filtered by using justETFwhich is a site that can help you easily find and compare ETFs.

5 Biggest S&P 500 ETFs in Europe

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 48+
Vanguard S&P 500 UCITS ETF IE00B3XXRP09 VUSA 0.07% Physical Distributing 26+
Invesco S&P 500 UCITS ETF IE00B3YCGJ38 SPXS 0.09% Synthetic Accumulating 10+
Xtrackers S&P 500 Swap UCITS ETF LU0490618542 XSPX 0.15% Synthetic Accumulating 4+
SPDR® S&P® 500 UCITS ETF IE00B6YX5C33 SPY5 0.09% Physical Distribution 4+

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 justetf.com, search for each ETF using the ISIN code, select it and look for the tab “Listing”. 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
Freedom24
XTB*

*XTB only offers ETFs in Portugal, Italy, Poland, Slovakia, the Czech Republic, France, Spain, Romania, and Germany.

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 (not all ETFs) $10 (varies between countries) 260+ FCA, CySEC, ASIC
Interactive Brokers Varies by exchange with tiered Pricing: 0.05% of Trade Value (min: €1.25, max: €29.00) €/$/£0 13,000+ FINRA, SIPC, SEC, CFTC, IIROC, FCA, CBI, AFSL, SFC, SEBI, MAS, MNB
DEGIRO £/€0 (some ETFs have a €/£1 handling fee), plus an annual £/€2.50 connectivity fee €/£1 200+ DNB and AFM
Freedom24 Up to €/$0.02 per unit (Min: €/$2) €/$0 1,500+ CySEC, BaFin, SEC
XTB* $/€/£0 €/$/£1 100+ CySEC, FCA, KNF, CNVM, and IFSC

*XTB only offers ETFs in Portugal, Italy, Poland, Slovakia, the Czech Republic, France, Spain, Romania, and Germany.

3. Place a “Buy Order”

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 DEGIRO:

1 – Search for the chosen ETF (we will use “CSPX”):

DEGIRO’s Search Bar

2 – Click “Buy”: As you noticed, two ETFs appear: one in EUR and another in USD. Since you are a European investor, you should go for the EUR version since it saves you money from currency exchange fees. After selecting it, and clicking “BUY”, you will be presented with the table shown on the right side:

DEGIRO’s Dashboard & Place Order

3 – Choose the order details. Now, it’s time to fill all boxes presented below (“BUY” and “Day order” appear by default, which is good).

DEGIRO’s Order Placement

  • Type of order: “Limit” appears by default because it supposes you want to buy at a maximum price, but you can change to “Market order”, for example, where you will buy at the prevailing market price;
  • Limit Amount: Assuming you kept the “Limit” as the type of order, you just need to insert that maximum amount in the box right after it “Limit (€)”;
  • Quantity: In “Quantity”, define the number of units you want to purchase;
  • Amount: The “Amount (€)” should be automatically filled as soon as “Limit (€)” and “Quantity” are defined.

4 – Place the order: Finally, click “Place Order” and a new window will show up. Here, you can take a final look at all the details before clicking “confirm”:

DEGIRO’s Check Order (final 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 to describe this overall management fee.

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.

Combinations of both also exist. 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.

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.

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.

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.

The 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!

Please let us know in the comments if you have any doubts or suggestions.

Happy investing!

Other 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.

Pedro Braz
Co-Founder & Growth Manager

Pedro is passionate about finance, marketing, and technology. He is a growth manager at several online projects and a former digital marketer for a fintech company.

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