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How to Invest in the S&P 500 in the UK | Step-by-Step

How to Invest in the S&P 500 in UK

Stocks and shares harbor a reputation of high-risk, high-reward investment. The odds of earning a profit are never high enough for comfort. A prudent investment, on the other hand, has the potential to yield solid returns even with a restricted investment budget. 

Investing in a diverse range of the largest and most successful US companies is often considered a reliable industry standard. This guide will walk you through the steps required to invest in the S&P 500 in the UK, highlighting its pros and cons, common mistakes to avoid, and the optimal platform to invest through.

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eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk. eToro USA LLC does not offer CFDs, only real Crypto assets available.

What is S&P 500?

S&P 500 (SPX), or Standard and Poor’s 500 Index, is a stock market index that reflects the performance of 503 of the largest and most successful companies in the US. The index included companies from various industries, such as energy, natural resources, finance, technology, and pharmacy.

The primary purpose of the S&P 500 index is to benchmark the status of the US stock market and the general well-being of the country’s economy. Drops in the index value indicate potential negative trends in the economy, while gains reflect a positive sign throughout the stock market.

The S&P 500’s performance since 1986. Source: statista.com

Traders and investors from around the globe rely on S&P 500 index for economic forecasting, stock performance analysis, and as a litmus paper for their individual investments. As such, the index is carefully monitored by both professional traders and novice investors.

How to start investing in the S&P 500 in the UK?

Stocks and shares sound complex, but you can start investing in the S&P 500 in the UK simply and quickly. If the investing process looks like a bite too big to chew yourself, you can always enlist the help of a professional. However, you might try it yourself, and the most convenient way to do this is via an online brokerage.

Investing in the stock market should still be taken seriously. After all, your money is on the line, and success is not guaranteed. If you stay open to advice and do adequate research beforehand, you can manage the risk and keep afloat.

Looking to invest in the S&P 500 from the UK? We’ve broken down the process into several easy-to-follow steps that we’ll explain in detail below. By following this guide, you can invest with confidence and increase your chances of success.

That said, let’s dive into the process.

How to invest in the S&P 500 in the UK: step-by-step

The following steps will cover all the required actions in concise instructions. 

Step 1: Choose a broker

Before investing in the S&P 500 in the UK, you must create an account on a preferred brokerage platform. The platforms are plenty, but they are not the same quality, and some brokerages suit different stock trading approaches better than others.

The S&P 500 index is commonly considered a long-term investment that requires a buy-and-hold approach. Some platforms are better suited for short-term day trading options. The choice is ultimately yours, but you should consider these factors before you commit to a brokerage:

  • Fees: Some brokerages charge fees for their services and transactions done via their platform. It is in your financial interest for these to be as low as possible, optimally non-existent, but bear in mind that cheaper isn’t better in all cases and consider the rest of the factors in combination with this;
  • Security: It is in your best interest to maintain the safety and privacy of your data when trading and investing online. In light of this, make sure to check the platform first and see whether it is registered by authorities like the Financial Conduct Authority (FCA) or Prudential Regulation Authority (PRA). Always use relevant, secure, and regulated brokerages;
  • Trading features and tools: Investing in the S&P 500 is a long-term process that begins rather than ends with the purchase of stocks. Monitoring your assets is another vital part of the process, and this is done more efficiently if the platform provides you with the necessary features and tools. Checking for the vitals of the market system with analytical tools and charts is also a bonus to look for in a brokerage. Consider looking at some investing guides for more information;
  • Market insights: Ultimately, your preferred brokerage should be transparent with information and news relevant to trading and investment in general. Look for an open community with a free flow of information that will benefit your investing activities.

Where to invest in the S&P 500 in the UK?

If you don’t have spare time or effort to spend searching for the right platform, you can skip that part and go straight to the most optimal candidate, eToro.

Investing in the S&P 500 with eToro is simple, and the platform passes all the checks with flying colors. If you opt for eToro, you get the following:

  • Commission-free stock trading; 
  • 2,000+ stocks from 17 exchanges;
  • Fractional shares available;
  • User-friendly platform.

Highly Rated Stock Trading & Investing Platform

  • Invest in 2,800+ stocks and other assets including 70+ cryptocurrencies and commodities.

  • 0% commission on buying stocks - buy in bulk or just a fraction from as little as $10.

  • Copy top-performing traders in real time, automatically.

  • Regulated by financial authorities including FCA and FINRA.

2.8 Million Users
eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk. eToro USA LLC does not offer CFDs, only real Crypto assets available.

Step 2: Fund your brokerage account

If you have completed the selection process, the next step is to transfer funds to your brokerage account. Most platforms provide several different funding options.

As for eToro, users have more than five payment options from the UK. Different options have different conditions and payment processing times, so keep that in mind before you decide.

Step 3: Do some research on the S&P 500

The very nature of the S&P 500 index is one of the benchmark, performance analysis, and economic indicators, as mentioned before. Investing in the stock market is a complex process that requires preparation before you commit and execute the trade – the S&P 500 isn’t an exception to this rule.

Before you invest in the S&P 500 in the UK, carefully observe the reports on the performance of this portfolio of big companies. Go through earnings reports, see what stock exchanges have to say about the index, and read the news about the 503 companies that constitute S&P 500.

All the companies included in this portfolio are publicly traded and thus obliged to disclose the relevant data to the public. Once you take a look at these, you will get a grasp on the direction the stock index is going in. Look for clues of these trends in long-term plans, business performance, and stock market history, but also the general trends in the economy, potential looming hazards to the global financial systems, and so on. The more, the better. 

Invest only when you think you know enough to start.

Step 4: Determine the amount you want to invest

The next step is to decide on the amount of money you want to invest in the S&P 500 index.

Consider your budget and the current price of the S&P 500. Compared to an average stock value, the S&P 500 is more valuable and thus more expensive. However, if you stick with eToro, you can buy fractional or parts of shares. In other words, with eToro, you can obtain a whole share, a part of the share, or more than one whole S&P 500 share. 

Step 5: Place your order and buy the S&P 500

After you decide on the amount of money you’re willing to invest in the S&P 500; the next step is to make the order and execute the trade. Log in (eToro in our case), navigate to the ‘Market’ section, find S&P 500 (SPX), and make the trade. Once the trade goes through, your portfolio should display the amount of the S&P 500 that you own. 

There are several types of orders that you can place:

  • Market order: A direct instruction to purchase the index at the displayed market price. The order is executed instantly, depending on the availability of the asset; 
  • Limit order: One of the features that simplify trading and reduce the amount of manual work and monitoring that traders need to go through, a limit order purchases the index at the price you decide by yourself. The order goes through only if the price conditions are met, meaning if the price is exactly what you designated or less.
  • Options contract: Options speculation enables leveraged positions in a security at a portion of the asset’s cost. A ‘call’ option makes a profit for the trader if the stock price goes up, while a ‘put’ option generates profit if the stock price goes down. Bear in mind that derivative instruments can only be traded on a margin account, and these usually require a higher minimum balance than regular brokerage accounts.

Step 6: Monitor your investment

Rather than stock in a single company, the S&P 500 index includes a variety of companies and tracks their combined value. While this conglomerate is more stable than shares in a single company, it still needs to be monitored and adjusted according to market conditions.

S&P 500 is a benchmark index, meaning other businesses measure its performance against it. However, traders in this index should also measure S&P 500’s historical performance and compare it to the presently available data and indices.

Follow global economic and financial press releases and news reports, and stay vigilant for signs of economic development in the stock market. The S&P 500 index is a portfolio that represents the economy of the whole country, so feel the pulse of the US economy frequently and in detail.

S&P 500 index price today

Should I invest in the S&P 500?

Discovering important information about the S&P 500 via news, articles, and press releases makes for fundamental analysis. On the other side of the spectrum is the technical analysis which aids traders in evaluating a business and finding out whether you should buy or sell by analyzing trends in price and chart patterns

This tool is precious for investors since it devolves convoluted indicators, such as moving averages and oscillators, into a binary operable buy-or-sell decision in real time.

Disclaimer: TradingView does not recommend trading financial instruments based exclusively on the advice of the Technical Rating indicator. These recommendations cannot predict future movements and are meant as assistance for spotting potentially favorable buy/sell conditions if this is consistent with their strategy.

Common mistakes to avoid when investing

It is important to know that mistakes are a fundamental part of investing.

That said, there are steps every trader can take to ensure that they stay the course and dodge the bullet that has caused many financial failures to beginners and senior traders alike. You can read in detail about the most common mistakes in investing, but the key issues include:

  1. Going into the stock market blindly, that is, without previously researching S&P 500;
  2. Trading without a clear goal or direction in mind;
  3. Timing the market;
  4. Pitting all your resources against one bet (in this case, all your investment budget into S&P 500);
  5. Falling prey to emotions during the key decision-making process.

Pros and cons of investing in the S&P 500 in the UK

Whether it is right or wrong that you decide to invest in the S&P 500 in the UK isn’t a simple question. Many different factors influence the pros and cons of that decision. To help you decide, we’ll list some of them:

Pros

Pros

  • Easy to invest in: With S&P 500, you don’t need to bother researching individual companies and estimating their financial trajectory on the market. You just need to take a general look at the US economy. Your investment will track the progression by itself;
  • Low investment costs: Index funds have lower fees than most other investments. No active management is necessary since S&P 500 index always tracks the overall market performance. Additionally, minimum investments for S&P 500 are low compared to the rest of the stock market;
  • High diversification: S&P 500 is a highly-diversified portfolio with a single fund. When you invest in this index, you invest in more than 500 companies from different sectors of the industry. There are 11 different sectors, with IT being the dominant one. If one of these sectors experiences a drop, the loss should be mitigated by the rest;
  • Top performers with market momentum: S&P 500 is a market-cap-weighted index that self-regulates in the sense that lower-performing companies get downgraded from the fund while any company that surpasses its competitor gets its spot. With S&P 500, the winner takes the most, if not all of it, so most of your investment will reflect the best-performing sector and company;
Cons

Cons

  • Can’t outperform the market: S&P 500 reflects the market as a whole, so it is impossible to win the zero-sum game or ‘beat’ the market. If the market wins, you win. In a sense, this puts a soft cap on the peak of your potential gains;
  • Invest in one, invest in all: You cannot selectively invest with the S&P 500 index fund. If you invest in one, you invest in all. Investors may choose not to invest in a certain company due to various reasons, e.g. cultural, political, or environmental. Investing in the S&P 500 excludes being selective in any way;
  • Changing composition: One of its advantages is also its flaw: the S&P 500 index can include or exclude companies at will. The index has changed over the years, with companies shifting sectors or even replacing companies with new ones due to changes in market capitalization and performance. This can cause shifts and disbalances that may harm your investments;
  • Market cap weighting: In the S&P 500, companies are weighted according to their market capitalization, so bigger market caps carry more ‘weight’ than those with smaller caps. This creates disproportionate inclinings towards some sectors, with information technology carrying the most weight right now, so a dip in the price of their shares creates a significant drop on the whole.

Conclusion

The S&P 500 index fund is the one indicator that ties most of the US and even the global economy around itself, dictating the value of virtually all other stocks and shares. This has caused it to be a more stable investment than your average stock or index, but as always, nothing is certain in the speculative trading industry.

You can ensure your safety by sticking to proper guides, doing adequate research, and sticking to smart investment decisions. With a lot of effort and a bit of fortune, your investment will bear fruit in the form of profit.

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.

FAQs about how to invest in the S&P 500 in the UK

Is the S&P 500 a good investment?

The S&P 500 is a reputable index fund for a lot of investors, which is usually a good recommendation for stable investments in the stock market.

Can you invest in the S&P 500 in the UK?

Yes, you can invest in the S&P 500 in the UK through a legitimate and valid investment platform such as eToro.

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

There are a couple of methods in which you can invest in the S&P 500 in the UK if you use eToro: market order, limit order, and options contract.

Is investing in the S&P 500 safe?

Investing in shares does never guarantee safe returns. However, if you observe all guidance provided in this article, you can minimize the potential hazard.

Can I sell my S&P 500 shares in the UK?

Yes, the S&P 500 index is a liquid investment, thus quickly turned into cash.

Highly Rated Stock Trading & Investing Platform

  • Invest in 2,800+ stocks and other assets including 70+ cryptocurrencies and commodities.

  • 0% commission on buying stocks - buy in bulk or just a fraction from as little as $10.

  • Copy top-performing traders in real time, automatically.

  • Regulated by financial authorities including FCA and FINRA.

2.8 Million Users
eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk. eToro USA LLC does not offer CFDs, only real Crypto assets available.

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