‘Never bet against America’, says legendary investor Warren Buffett.  He’s among many who have suggested that investing in the S&P 500 is a viable approach for many investors with a long-term horizon.  So what’s the S&P 500, why is it of interest to an Ireland-based investor, and how can you access it?

What is the S&P 500?

The Standard & Poor’s 500 is an index of 500 of the largest companies listed on stock exchanges in the US.  S&P 500 index funds aim to track the performance of that index as cheaply and as closely as possible.

As it captures the performance of many companies in the world’s largest economy, and has been around for more than sixty years, the S&P 500 is one of the most popular markets to track.

In fact, an S&P 500 index fund from trailblazing fund manager Vanguard was the first ever index fund – and you can still invest in a Vanguard S&P 500 in Ireland today.

Here’s a breakdown of the top ten holdings in the index:

Company % of fund
Apple 5.8
Microsoft 5.3
Amazon 4.2
Alphabet 3.9
Facebook 2.2
Tesla 1.5
Berkshire Hathaway 1.5
JP Morgan Chase & Co 1.3
Johnson & Johnson 1.2
Visa 1.1

Source: Vanguard S&P 500 factsheet, as at 30 April 2021

It’s a hitlist of some of the world’s most successful companies.  Of course, there’s a strong American flavour – but remember that many of the largest members of the index are global enterprises.  In fact more than 30% of the sales of companies in the S&P 500 are generated outside the US.

How has the S&P 500 performed?

The S&P 500 has been a very solid source of investor returns over the last decade.  It has grown by 32.2% over the last year, and by an average annual amount of 18.1% over the last three years, and 15.9% over the last ten years.

But it’s not always been plain sailing – in the depths of the global financial crisis, in 2008, the S&P 500 lost more than 38% of its value in dollar terms.  That’s in the nature of stock market investing, and one reason to consider investing in the S&P 500 alongside some other funds for an appropriate investment mix.

How can invest in an S&P 500 fund?

These days, many fund managers run funds which track S&P 500. When choosing one, you’ll want the right combination of faithfulness to the index and confidence in the fund manager. But cost, ease of administration, and ability to combine with other funds also count.

Ireland-based investors have a couple of ways to access an appropriate S&P 500 index fund, whether as an investment or a pension.

You can invest in it directly, buying the fund through an investment platform.  That’s an approach Moneycube can help with, typically as part of a wider investment portfolio – maybe including funds covering other geographies, some actively managed funds, or exposure to other kinds of assets such as bonds or gold.

Taking this route, you’ll have lower costs, a more direct holding, and can add other funds to your portfolio from a choice of many thousands.  You’ll also have to file your own taxes, and be a bit more hands-on with your investment.

Alternatively, the simplest way to access a Vanguard S&P 500 index fund is using Standard Life, with whom Moneycube has a good relationship.  You could also mix it with some of Vanguard’s other funds (including bond, European, and emerging markets funds).  In this scenario, there’s no tax admin, and fully automated regular investing is easily done.

Whichever route is right for you, Moneycube can help you could put some of your savings or your pension into the S&P 500, and bet at least some of your money on America.  Make a start today.

 

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