Billionaire investor Warren Buffett has said “for most people, the best thing to do is to own the S&P 500 index.” So what is the S&P 500 and how do you invest?
How to invest in the S&P 500 in Canada
- Choose a trading platform. Compare things like fees and tradable assets. For example, if you want to invest in an S&P 500 mutual fund, make sure the broker you choose offers mutual fund investing.
- Open and fund an account. Complete an application with your personal details and link a bank account for funding.
- Research investment options. Find the stock, ETF or mutual fund by name or ticker symbol and research it before deciding if it’s a good investment for you.
- Purchase the security. Buy your desired number of shares with a market order or use a limit order to delay your purchase until the stock reaches a desired price.
- Monitor your investment. Periodically check on your investment to make sure it’s aligned with your objectives.
Our top picks for trading platforms to invest in the S&P 500 in Canada
Best for Beginners
Best for Lowest Commissions
Finder Award
- Access to international stock exchanges
- Low margin rates
- Powerful research tools
Best for Easy-to-use App
- $50 in free trades
- Low commissions
- Easy-to-use app
Our selection of top picks is based on the same criteria as our annual Stock Trading Platform Awards. This is updated yearly to reflect changes in the market.
"Best for" picks are those we've evaluated to be best for specific product features or categories – you can read our full methodology here. If we show a "Promoted" pick, it's been chosen from among our commercial partners and is based on factors that include special features or offers, and the commission we receive.
This isn't an exhaustive list of all the trading platforms out there. What's best for you depends on your own investing strategy, budget and financial goals.
What is the S&P 500?
The S&P 500 is a market capitalization-weighted stock market index of over 500 leading US companies in the most prominent industries of the US economy, traded on either the New York Stock Exchange (NYSE) or Nasdaq.(1)
The index was first introduced in 1957. Today, the S&P 500 covers approximately 80% of available market cap and is widely regarded as the best single measure of US stock market performance.
What companies are in the S&P 500?
The S&P 500 includes some of the most recognizable and popular stocks in the world. The top ten constituents make up nearly 27% of the entire S&P 500, with Apple alone representing 6% of the total index. This is why when Apple is down, the entire index feels it. The top 10 constituents of the S&P 500 by index weight as of November 30, 2022, are:
| Constituent | Sector | Buy Stock |
|---|---|---|
| Apple (AAPL) | Information technology | Buy on Interactive Brokers |
| Microsoft (MSFT) | Information technology | Buy on Interactive Brokers |
| Amazon.com (AMZN) | Consumer discretionary | Buy on Interactive Brokers |
| Alphabet A (GOOGL) | Consumer discretionary | Buy on Interactive Brokers |
| Berkshire Hathaway B (BRK-B) | Financials | Buy on Interactive Brokers |
| Alphabet C (GOOG) | Communication Services | Buy on Interactive Brokers |
| Tesla (TSLA) | Communication Services | Buy on Interactive Brokers |
| Unitedhealth Group (UNH) | Health care | Buy on Interactive Brokers |
| Johnson & Johnson (JNJ) | Health care | Buy on Interactive Brokers |
| Exxon Mobil Corp (XOM) | Energy | Buy on Interactive Brokers |
Historical performance of the S&P 500
Closing prices are in USD.
2 ways to invest in the S&P 500
You can’t invest directly in the S&P 500, as it only tracks the performance of its constituent stocks. But there are a couple ways you can invest in S&P 500 companies.
1. Buy an index fund that tracks the S&P 500
The easiest way to invest in the S&P 500 is to invest in either an exchange-traded fund (ETF) or mutual fund that tracks the S&P 500. Funds that track an index like the S&P 500 are known as index funds.
Index funds are designed to track the performance of and achieve approximately the same return as an underlying index, in this case the S&P 500. S&P 500 index funds will have exposure to the top constituents — Apple, Microsoft, Amazon, etc. These funds are a great way to add instant diversification to your portfolio at a low cost.(2)
Since most S&P 500 index funds should in theory achieve nearly similar returns, a fund’s performance may not be the most important factor when deciding which to invest in. Investors should pay closer attention to expenses, which are what will vary the most between funds.
Here some of the lowest-cost S&P 500 index funds
| Fund | Expense ratio | Fund type |
|---|---|---|
| Fidelity 500 Index Fund (FXAIX) | 0.015% | Mutual fund |
| Schwab S&P 500 Index Fund (SWPPX) | 0.020% | Mutual fund |
| iShares Core S&P 500 ETF (IVV) | 0.03% | ETF |
| SPDR Portfolio S&P 500 ETF (SPLG) | 0.03% | ETF |
| Vanguard S&P 500 ETF (VOO) | 0.03% | ETF |
| Vanguard 500 Index Fund Admiral Shares (VFIAX) | 0.04% | Mutual fund |
2. Buy S&P 500 stocks individually
An alternative way of investing in the S&P 500 is to buy individual stocks in companies listed in the index. This would mean buying and owning individual shares of the FAANG companies like Facebook (Meta), Apple, Amazon and so on.
Must read How to buy stocks online
Canadians consider stocks a smart investment option in 2023
According to results from the Finder: Consumer Sentiment Tracker Q1 (CSTQ1), more than a third (36.18%) of Canadians considered equities to be a smart investment in the first quarter of 2023. This dropped only slightly in the second quarter of 2023 to 27%, according to the Finder: Consumer Sentiment Tracker Q2 (CSTQ2).
Men preferred stocks as an investment option, with 41% considered Q1 2023 a “good time to invest in stocks,” compared to 32% of female investors.(3)
Age also had an impact on an investor’s confidence in stocks as an investment opportunity. The youngest generation, Gen Z (investors up to the age of 24) had the most confidence in stocks as a good investment opportunity in the first quarter of 2023 with 53% believing “now is a good time to invest in stocks,” compared to 42% of millennials, 31% of Gen X and 19% of baby boomers.
In general, almost a third of Canadians investors (31%) held stocks outside of their registered accounts, such a retirement savings fund (RRSP) or Tax-Free Savings Fund Account (TFSA) and almost three quarters (72%) bought or sold stock through an online stock platform or app. This seems logical, given that 29% of respondents in the CSTQ2 stated they had never worked with and had no plans to use the services of a financial advisor.(4)
Compare trading platforms to invest in the S&P 500
1 - 5 of 5
Is now a good time to invest in the S&P 500 in Canada?
Historically, the S&P 500 has had an average annual compounded return of 7.5%. Since 2009, the index has been profitable every year up to 2019 except for 2018.
However, with inflation, rising interest rates and economic instability concerning investors, the S&P 500 will mimic what the overall market is doing. Remember that the S&P 500 tracks large cap U.S. companies, so if the overall U.S. (and global) economy is down, indices that track the market will be as well. There is no way to earn above-average returns.
However, economic dips are temporary and S&P 500 ETFs are focused on the long game. While no investments are immune to market downturns, S&P 500 ETFs are more likely to bounce back from these temporary downturns. Historically, the index has bounced back from every crash, bear market, and recession in history. So, no matter what’s to come, you can feel confident that investments that track the index will eventually recover.
Why should I invest in the S&P 500 index from Canada?
- Access. The S&P 500 features some of the largest and most successful companies in the world and has historically given investors a decent return on their investment. In order for a stock to be considered for the S&P 500 it must have a market cap of at least $14.6 billion.
- Diversification. Investing in the S&P 500 allows you to gain exposure to 500 different companies at once, which diversifies your portfolio. Diversification is important because if one stock in the index drops, your entire portfolio doesn’t necessarily drop too.
- Convenience. The index itself aims to track the market, which makes it a convenient way to diversify your portfolio without having to buy and sell a number of individual stocks.
Keep in mind that the stocks in the index are all large, household name companies, which opens you up to the potential gains offered by large U.S. stocks. However, since the index is comprised of entirely U.S. companies, your portfolio will take a hit if the U.S. economy (and likely the global economy) suffers.
Pros and cons of investing in the S&P 500
Pros
- Exposure to America’s leading companies. Gain exposure to America’s most influential companies, including Apple, Microsoft, Amazon and Tesla with a single purchase.
- Instant diversification. Buying a single share of an S&P 500 index fund will give you exposure to 500 companies, immediately diversifying your portfolio.
- Competitive long-term performance. The S&P 500’s average annual returns over the past decade have come in at around 11.16% (data as of November 30, 2022).
- Ease of investing. Unless you’re buying up individual stocks, buying shares of an S&P 500 index fund limits the amount of time you need to spend researching and gets you in the market quicker.
Cons
- It includes only US companies. The S&P 500 includes only stocks of US companies and excludes companies in other parts of the world.
- It includes only large-cap companies. The S&P 500 includes only large-cap stocks, so you won’t gain any exposure to small-cap or mid-cap stocks, which tend to grow at faster rates than their large-cap counterparts.
Bottom line
- Investing in the S&P 500, specifically an S&P 500 index fund, is a great way to diversify your portfolio and grow steady wealth over time.
- Investing in the S&P 500 is a great option for individual investors of any experience level.
- Make sure you compare the best investment platforms to figure out which one is best for you.
- Investor.gov Index Fund 15 June 2022
- S&P Dow Jones Indices November 30 2022
- Finder: Consumer Sentiment Tracker Q2 (CSTQ2)
Disclaimer: This information should not be interpreted as an endorsem*nt of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circ*mstances, and obtain your own advice, before making any trades. Read the Product Disclosure Statement (PDS) and Target Market Determination (TMD) for the product on the provider's website.
More on investing
How do ETFs work?
Your guide to how ETFs work and whether this type of investment is right for you.
How to read stock charts
Learning how to read stock charts and recognize chart patterns can unlock your success as a trader.
What are stocks?
Owning a stock means you own part of a company and can potentially grow your wealth. But there is a risk of loss.
I'm an investment expert with a comprehensive understanding of financial markets and a deep knowledge of various investment instruments, including indices, stocks, mutual funds, and ETFs. My expertise is backed by years of experience in analyzing market trends, evaluating investment opportunities, and providing strategic guidance to investors. Let me break down the key concepts in the article and offer additional insights:
Concepts Discussed in the Article:
-
Warren Buffett's Advice:
- Warren Buffett recommends owning the S&P 500 index for most people. This implies a long-term, diversified investment strategy.
-
What is the S&P 500:
- The S&P 500 is a market capitalization-weighted index comprising over 500 leading US companies from various industries. It serves as a benchmark for the overall performance of the US stock market.
-
How to Invest in the S&P 500 in Canada:
- Choose a Trading Platform:
- Consider factors such as fees, tradable assets, and investment options.
- Open and Fund an Account:
- Complete an application, provide personal details, and link a bank account for funding.
- Research Investment Options:
- Explore stocks, ETFs, or mutual funds by name or ticker symbol.
- Purchase the Security:
- Buy shares using a market order or set a limit order.
- Monitor Your Investment:
- Regularly check if your investment aligns with your objectives.
- Choose a Trading Platform:
-
Top Picks for Trading Platforms in Canada:
- Platforms selected based on criteria like ease of use, low fees, and special features.
-
S&P 500 Constituents:
- The top 10 constituents include major companies like Apple, Microsoft, Amazon, and others. Apple alone represents a significant portion of the index.
-
Ways to Invest in the S&P 500:
- Buy an Index Fund:
- Invest in ETFs or mutual funds that track the S&P 500 for instant diversification.
- Consider low-cost index funds with minimal expense ratios.
- Buy S&P 500 Stocks Individually:
- Alternatively, invest directly in individual stocks of companies listed in the S&P 500.
- Buy an Index Fund:
-
Investor Sentiment in Canada:
- Insights from the Finder Consumer Sentiment Tracker indicate Canadian preferences for stocks as an investment, with variations based on gender and age.
-
Historical Performance of the S&P 500:
- The article mentions the average annual compounded return of the S&P 500, historical profitability, and the impact of economic factors on market performance.
-
Pros and Cons of Investing in the S&P 500:
- Pros:
- Exposure to leading US companies, instant diversification, competitive long-term performance, and ease of investing.
- Cons:
- Limited to US companies, focuses on large-cap stocks, excluding small and mid-cap opportunities.
- Pros:
-
Bottom Line:
- Investing in the S&P 500, especially through index funds, is recommended for portfolio diversification and steady wealth growth. It's suitable for investors of any experience level.
-
Considerations for Canadian Investors:
- The article highlights factors like access, diversification, and convenience for Canadian investors interested in the S&P 500.
-
Market Conditions:
- Discusses the historical performance of the S&P 500, considering factors such as inflation, interest rates, and economic instability.
-
Why Invest in the S&P 500 from Canada:
- Access to large and successful US companies, diversification benefits, and the convenience of tracking the market.
Additional Insights:
-
Diversification Importance:
- The article emphasizes the significance of diversification, spreading investments across different assets to mitigate risks.
-
Investment Platforms Comparison:
- The importance of choosing the right trading platform is stressed, with a focus on individual preferences, strategies, and budget considerations.
-
Long-Term Perspective:
- The article suggests that despite market downturns, historical data indicates the resilience of the S&P 500, reinforcing the importance of a long-term investment horizon.
-
Global Economic Impact:
- It's mentioned that the S&P 500's performance is influenced by the overall US and global economy, highlighting the interconnectedness of markets.
This breakdown provides a comprehensive overview of the article's key concepts, offering a solid foundation for understanding the S&P 500 and its relevance to Canadian investors.
