What is the S&P 500 and how can Canadians invest in it.

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When people ask: “How is the US stock market doing?” They general refer to how is the S&P 500 doing.

The S&P 500 is an abbreviation from “Standard & Poor’s 500” which is an index of the 500 biggest companies in the US.  This index is market capitalized, which means that the biggest companies have bigger weight or a bigger percentage of index than smaller companies. Until now, this index is considered to be the best representation of the health of US companies.

So how do we buy the index?

We can buy the S&P 500 through Index funds and ETFs.

I will just cover my favorite index fund which is the Vanguard 500 Index fund. This fund has an expense ration of 0.14%, this means that you pay $14 of fees for every $10,000 invested. It has a minimum of $3,000 US to buy it and after that you can deposit as little a $1 to make subsequent purchases.

But I prefer to buy ETFs instead of index funds. I will not go into details of the differences of index funds and ETFs, just think of them as almost identical products with some slight differences which I will not explain at the moment.

In the ETF realm there are two which overshadow all the rest.

US Dollars

  1. The iShares S&P 500 Index Fund (IVV) with an expense ratio of only 0.04%, and
  2. the Vanguard S&P 500 ETF (VOO)

CAN Dollars

  1. The iShares Core S&P 500 Index ETF
  2. the Vanguard S&P 500 Index ETF (VFV)

Whenever I suggest to my friends to have some US in their portfolio, this is my suggestion the S&P 500. Generally, I suggest to my friends to have 1/3 of their portfolio in Canada, 1/3 in the US, and 1/3 in international stocks. In other blogs I will share my favorite Canadian and International ETFs

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2 thoughts on “What is the S&P 500 and how can Canadians invest in it.

  1. I live in canada and I am looking to get started for the first time in investing. I have no knowledge of anything but as of late I have been reading a little about different stocks and it seems the S&P 500 is a more safe long term investment which is what I am looking for. How do I go from getting my money to someone I can trust? Can I go through my bank?

  2. Hello Anthony,

    All major Canadian arms have a brokerage service arm and all of them are trustful in regards to keeping your money safe.

    However, they are to be viewed with skepticism when you ask one of their financial advisers for help. If you ask for help, most likely the adviser will guide you towards their actively managed funds which charge a management fee of about 2% to 3%. Mysteriously enough they will never guide you towards index funds or ETFs with management fees of less that 0.1%.

    Are you planing make periodic monthly contributions or are planning to make a set amount? Good luck.

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