When people talk about what’s happening in ‘the stock market’, they may be referring to the S&P 500. It represents roughly 80% of the total US stock market's value, so is a good gauge of overall performance and sentiment.
Its full name is the Standard & Poor’s 500 Composite Stock Price Index. The UK equivalent of the S&P 500 is the FTSE 100.
You can’t invest directly in the index, but you can invest in an index fund or an exchange-traded fund (ETF) that tracks the index. You can also buy individual stocks of companies in the S&P 500.
Remember, the value of investments can go down as well as up, and you may not get back what you invest.
Many of the companies listed on the S&P 500 are well-known names, such as Amazon, Coca-Cola, Netflix, Apple, and Microsoft, while others will probably be less familiar.
The S&P 500 includes leading companies across a wide range of industries, from technology to health care.
Companies must meet certain criteria before being added to the index. For example, they must be a US domiciled company with an estimated market capitalisation (value) of at least $14.5 billion. A company will be removed from the S&P 500 if it no longer qualifies.
An S&P 500 ETF aims to match the performance of the S&P 500 index. So, if the index goes up or down, the value of your investment in the ETF should change with it.
A wide choice of S&P 500 ETFs exist. Some track the whole index, while others focus on certain sectors, such as technology.
ETFs and index funds allow you to gain exposure to the world’s leading companies without spending hours researching individual stocks.
ETFs are traded on the stock market, allowing you to buy or sell them at any time during the day, unlike mutual funds, for example, which can only be traded once a day.
You can invest in an index fund or an ETF that tracks the S&P 500 index, like the HSBC American Index Fund – Accumulation C.
ETFs and index funds can provide a cost-effective way to access the S&P 500 and diversify your portfolio, making them ideal for beginner investors.
These funds allow you to spread your risk by putting your money in a range of investments. If some companies within the index perform badly, they could be balanced out by others perform better.
You can see our entire range of funds from HSBC and other leading fund managers on our online fund platform. Eligibility criteria and fees apply.
If you prefer to make your own investment decisions, another option is to buy individual shares of S&P 500 companies on a share dealing platform.
If the shares you buy go up in value, you’ll make a profit when you sell them. But remember, shares can go up and down in value, so you could get back less than you invest.
You can buy S&P 500 shares using InvestDirect Plus, our share dealing platform. Eligibility criteria and fees apply.
Before investing, consider your personal finances, goals, and appetite for risk.
Investing should be seen as a medium to long-term commitment. You should be prepared to invest for at least 5 years to give your money the potential to grow and recover from any losses.
Having an emergency fund can provide a safety net to prevent you from having to sell your investments too early.
Explore: Understanding market volatility
The S&P 500 is an index, so it doesn’t pay dividends. However, you can invest in mutual funds or ETFs that track the index. If the companies in these funds pay dividends, you'll receive yours based on how many shares of the funds you hold.
