Sign up now to start investing in the S&P 500 from just US$10 on Stake Wall St.
Get started
Stake logo

by Megan Stals
Share

How to invest in S&P 500 from Australia in 2023

Investing in the S&P 500 can be a powerful strategy for Australian investors looking to tap into the growth potential of the largest companies in the US. With its long-standing track record of delivering impressive returns, the S&P 500 has become a favoured choice among smart investors seeking to grow their wealth.

This article focuses on how to buy specific securities, however, it is not a recommendation to invest in them and should not be taken as financial advice. Do your own research and make your own decisions, or even consider getting advice from a licensed financial adviser before investing.

What is the S&P 500?

The S&P 500, also known as the Standard & Poor's 500, is a widely followed stock market index in the United States. It is composed of 500 of the largest publicly traded companies listed on U.S. stock exchanges. The index is designed to provide a snapshot of the overall performance of the U.S. equity market and serves as a benchmark for measuring the performance of large-cap stocks.

The S&P 500 is market cap weighted, which means that the companies with the largest market values have a greater influence on the index's movements. It includes the largest U.S. listed companies, ranging through various sectors such as technology, healthcare, finance, consumer goods, and more, offering a broad representation of the U.S. economy.

The index is frequently used by investors and financial professionals as a gauge of the stock market's health and as a basis for constructing investment portfolios. Many mutual funds and exchange-traded funds (ETFs) aim to replicate the performance of the S&P 500, allowing investors to gain exposure to a diversified portfolio of U.S. large-cap companies.

🎓 Check out our article for a deeper dive into what the S&P 500 index is.

S&P 500 Index historical performance from 1970 to 2023. Source: Wikipedia

Top 10 constituents of S&P 500

As of 30 November 2023 from the S&P 500 factsheet, these were the S&P 500 top 10 holdings of the index:

Constituent

Ticker

Sector

Microsoft Corp

MSFT

Information Technology

Apple Inc.

AAPL

Information Technology

Amazon.com Inc

AMZN

Consumer Discretionary

Nvidia Corp

NVDA

Information Technology

Aplabet Inc A

GOOGL

Communication Services

Meta Platforms, Inc. Class A

META

Communication Services

Alphabet Inc C

GOOG

Communication Services

Tesla, Inc.

TSLA

Consumer Discretionary

Berkshire Hathaway B

BRK.B

Financials

Unitedhealth Group Inc

UNH

Health Care

How to invest in S&P 500?

Australian investors can invest in the S&P 500 by choosing an Australian-listed ETF that tracks the index on the ASX or by opening an international stock investing account to invest in US-listed S&P 500 funds or ETFs.

If you open an account with Stake you can invest in Australian and U.S. securities, which means you can access the S&P 500 ETFs across both markets.

Steps on how to buy S&P 500 in Australia

1. Open a stock investing account

To invest in S&P 500 through an ETF, you'll need to sign up to an investing platform with access to Australian and U.S. ETFs. Lucky for you Stake has access to both.

2. Fund your account

Complete an application with your personal and financial details. Fund your account with a bank transfer, debit card or even Apple/Google Pay.

3. Search for an ETF that tracks the S&P 500

Find the asset by searching for the name or ticker symbol. Do your own research to ensure it is the right investment product for your own circumstances.

4. Choose an order type and buy the asset

Buy on any trading day with a market, limit or stop order. Look into dollar cost averaging to spread out your risk, which smooths out buying at consistent intervals.

5. Monitor your investment

Optimise your portfolio by tracking how the security performs with an eye on the long term. You may be eligible for dividends and shareholder voting rights that affect your shares.

💡Related: Discover the 10 reasons why you should invest in U.S. shares

Ways to buy S&P 500: ETFs vs mutual funds

When it comes to buying the S&P 500 in Australia, you have the option of investing through ETFs (Exchange-Traded Funds) or mutual funds. Both options provide exposure to the S&P 500 and both tend to be low-cost index funds, but there are some key differences between them:

  • Structure: ETFs are traded on stock exchanges like individual stocks, while mutual funds are bought and sold through the fund company at the end-of-day net asset value (NAV).
  • Flexibility: ETFs can be bought and sold throughout the trading day at market prices, offering more flexibility for investors to enter or exit positions. Mutual funds are typically bought or sold at the end of the trading day based on the NAV.
  • Cost: ETFs tend to have lower expense ratios compared to mutual funds. ETFs are passively managed and aim to replicate the index performance, whereas mutual funds may have higher management fees due to active management.
  • Minimum investments: Mutual funds often require a minimum initial investment, which can be a barrier for some investors. ETFs generally don't have such minimum investment requirements which means you can start investing in an S&P 500 ETF from as little as $10 using fractional shares.
  • Tax efficiency: ETFs are generally more tax-efficient than mutual funds. ETFs typically have lower capital gains distributions since they are structured to minimise taxable events.

It's important to consider your investment goals, trading preferences, costs, and tax implications when deciding between ETFs and mutual funds to invest in the S&P 500.

What Australian ETF tracks the S&P 500 index?

If you are looking to invest in Australian ETFs that track the S&P 500 index, there are three popular options:

  • iShares Core S&P 500 ETF ($IVV): This exchange-traded fund is managed by BlackRock and seeks to provide investment results that correspond to the performance of the S&P 500 index. It is traded on the Australian Securities Exchange (ASX) and aims to provide investors with exposure to 500 large-cap US companies.
  • SPDR S&P 500 ETF Trust ($SPY): This ETF is managed by State Street Global Advisors and is one of the largest and most traded ETFs in the world. While it is primarily listed on US exchanges, it also has a presence on the ASX through Chess Depository Interests (CDIs). The SPY aims to track the performance of the S&P 500 index.
  • BetaShares S&P 500 Yield Maximiser Fund ($UMAX): This ETF by BetaShares is designed to provide investors with exposure to the S&P 500 index while offering enhanced income potential. It aims to track the performance of a yield-optimised index based on the S&P 500 and incorporates a covered call strategy to generate additional income.

Each of these ETFs has its own unique characteristics, liquidity and expense ratios.

💡Related: Discover the best-performing ETFs on the ASX

What U.S. ETFs track the S&P 500?

There are several ETFs in the U.S. that track the S&P 500 index. Here are three popular options:

  • SPDR S&P 500 ETF Trust ($SPY): Managed by State Street Global Advisors, SPY is one of the oldest and largest ETFs tracking the S&P 500. It aims to provide investment results that correspond to the performance of the index. SPY is highly liquid and widely traded, making it a popular choice for investors seeking broad exposure to the U.S. equity market.
  • iShares Core S&P 500 ETF ($IVV): Managed by BlackRock, IVV seeks to track the investment results of the S&P 500 index. It offers investors a low-cost, tax-efficient way to gain exposure to large-cap U.S. stocks. IVV is known for its tight tracking of the index and is a popular choice among long-term investors.
  • Vanguard S&P 500 ETF ($VOO): Offered by Vanguard, VOO aims to track the performance of the S&P 500 index. It is known for its low expense ratio, making it an attractive option for cost-conscious investors. VOO is designed to provide broad exposure to the U.S. equity market and is widely held by both retail and institutional investors.

💡Related: 10 U.S. High Yield Bond ETFs to Watch

How to choose an S&P 500 index fund?

Choosing an S&P 500 index fund involves considering various factors to align your investment portfolio with your investment goals. Here's a step-by-step guide to help you select an S&P 500 index fund:

  1. Understand your investment goals: Determine your investment objectives, such as long-term growth, income generation, or diversification, to align with the purpose of investing in the S&P 500.
  2. Research different index funds: Conduct thorough research on different S&P 500 index funds available in the market. Consider factors such as expense ratio, fund size, tracking error, and fund provider reputation.
  3. Evaluate expense ratio: Compare the expense ratios of different funds. Lower expense ratios generally indicate lower costs for investors and can have a positive impact on long-term returns.
  4. Assess tracking error: Review the historical tracking error of the fund. Tracking error measures the deviation of the fund's performance from the underlying index. Look for funds with lower tracking error, as it reflects closer alignment with the index's returns.
  5. Consider fund size and liquidity: Look for index funds with larger assets under management (AUM) as they tend to have better liquidity, tighter bid-ask spreads, and lower trading costs.
  6. Review historical performance: Evaluate the historical performance of the index funds. While past performance does not guarantee future results, it can provide insights into the fund's ability to track the index effectively.
  7. Understand the fund provider: Research the reputation and track record of the fund provider. Consider their experience, expertise, and commitment to the index fund managers.
  8. Check fund structure: Determine whether you prefer an ETF or a mutual fund structure. Consider factors such as trading flexibility, minimum investment requirements, and tax efficiency.
  9. Read the prospectus: Carefully read the prospectus and fund documentation to understand the fund's investment strategy, risk profile, and any additional features or limitations.

Remember that investing involves risk, and it's essential to conduct your due diligence and consider your risk tolerance before making any investment decisions.

💡Related: What are the top U.S. index funds to invest in?

🆚 Which S&P 500 index fund to choose: SPY vs IVV

🆚 Which S&P 500 index fund to choose: SPY vs VOO

Pros and cons of investing in the S&P 500

Pros

Cons

Broad market exposure: The S&P 500 represents a diverse range of 500 large-cap U.S. companies, providing investors with broad market exposure.

Lack of small-cap exposure: The S&P 500 focuses on large-cap companies, potentially missing out on opportunities presented by smaller or mid-sized companies.

Historical performance: The S&P 500 has historically delivered strong long-term returns, outperforming many other investment options.

Single-country risk: Investing solely in the U.S. market through the S&P 500 exposes investors to risks associated with the domestic economy and regulatory changes.

Passive investing: Investing in the S&P 500 allows for a passive investing approach, as it seeks to replicate the index's performance.

Concentration risk: The index is market-cap weighted, meaning larger companies have a greater impact, potentially leading to concentration risk.

Liquidity: S&P 500 ETFs are usually highly liquid, making it easy to buy or sell shares.

Currency risk (for non-U.S. investors): Non-U.S. investors face currency exchange rate risk when investing in the U.S.-based S&P 500.

Investing in S&P 500 FAQs


Investing solely in the S&P 500 may provide exposure to a diversified portfolio of large-cap U.S. companies. However, it is important to consider your risk tolerance, investment goals, and overall portfolio diversification. Diversifying across various asset classes and regions can help mitigate risk and optimise long-term returns.


Yes, it is possible to invest AU$100 in the S&P 500. There are fractional shares and low-cost investment options like ETFs that allow investors to buy small amounts of the S&P 500 or its equivalent instruments. If you have more capital to start with, check out our article on how to invest $5,000 in Australia.


The S&P/ASX 200 is usually considered the equivalent of the S&P 500 in Australia. The S&P/ASX 200 is a market-capitalisation-weighted index that represents the performance of the top 200 companies listed on the Australian Securities Exchange (ASX). It is designed to measure the performance of the Australian equity market and is widely used as a benchmark for the Australian stock market.


This does not constitute financial product advice nor a recommendation to invest in the securities listed. Past performance is not a reliable indicator of future performance. As always, do your own research and consider seeking appropriate financial or taxation advice before investing.


Portrait photo of Megan Stals, Market Analyst at Stake.

Megan Stals

Market Analyst

Megan is a markets analyst at Stake, with 7 years of experience in the world of investing and a Master’s degree in Business and Economics from The University of Sydney Business School. Megan has extensive knowledge of the UK markets, working as an analyst at ARCH Emerging Markets - a UK investment advisory platform focused on private equity. Previously she also worked as an analyst at Australian robo advisor Stockspot, where she researched ASX listed equities and helped construct the company's portfolios.


Related


Want more?

You know what to do

Insights, trends and company deep dives delivered straight to your inbox.


Stake logo
Over 7,000 5-star reviews
App Store logoGoogle Play logo

Subscribe to our free newsletters

By subscribing, you agree to our Privacy Policy.

Stakeshop Pty Ltd, trading as Stake, ACN 610105505, is an authorised representative (Authorised Representative No. 1241398) of Sanlam Private Wealth Pty Ltd (Australian Financial Services Licence No. 337927) ('Sanlam') and an authorised representative (Authorised Representative No. 1241398) of Airwallex Pty Ltd (Australian Financial Services Licence No. 487221) ('Airwallex'). Stake is not authorised by Airwallex under Airwallex’s AFSL to arrange for clients to be issued with securities as Airwallex is not authorised under its AFSL for this purpose. Stake is not authorised by Sanlam under Sanlam’s AFSL to arrange for clients to be issued with a non-cash payment facility as Sanlam is not authorised under its AFSL for this purpose. Stake SMSF Pty Ltd (‘Stake Super’) is not licensed to provide financial product advice under the Corporations Act. This specifically applies to any financial products which are established if you instruct Stake Super to set up a self managed super fund (‘SMSF’). When you sign up to Stake Super, you are contracting with Stake SMSF Pty Ltd who will assist in the establishment of a SMSF under a ‘no advice model’. You will also be referred to Stakeshop Pty Ltd to enable your trading account and bank account to be set up in order to use the Stake Website and/or App. Stakeshop Pty Ltd will also run marketing and promotions to you under. For more information about SMSFs, see our SMSF Risks page.The information on our website or our mobile application is not intended to be an inducement, offer or solicitation to anyone in any jurisdiction in which Stake is not regulated or able to market its services. At Stake and Stake Super, we’re focused on giving you a better investing experience but we don’t take into account your personal objectives, circumstances or financial needs. Any advice given by Stake is of a general nature only. As investments carry risk, before making any investment decision, please consider if it’s right for you and seek appropriate taxation and legal advice. Please view our Financial Services GuideTerms & ConditionsPrivacy Policy and Disclaimers  before deciding to invest on or use Stake or Stake Super. By using our website or service in any way, you agree to our Privacy Policy and Terms & Conditions. All financial products involve risk and you should ensure you understand the risks involved as certain financial products may not be suitable to everyone. Past performance of any product described on this website is not a reliable indication of future performance. Stake and Stake Super are registered trademarks in Australia.

Copyright © 2024 Stake. All rights reserved.