{"id":354364,"date":"2022-08-05T22:05:36","date_gmt":"2022-08-05T14:05:36","guid":{"rendered":"https:\/\/www.ziet.co\/v2024\/?p=354364"},"modified":"2024-11-07T10:47:04","modified_gmt":"2024-11-07T02:47:04","slug":"how-to-invest-in-the-sp-500-a-practical-guide","status":"publish","type":"post","link":"https:\/\/www.ziet.co\/v2024\/investing\/how-to-invest-in-the-sp-500-a-practical-guide\/","title":{"rendered":"How To Invest in the S&P 500 – A Practical Guide"},"content":{"rendered":"\n

<\/path><\/svg><\/span><\/span>Estimated reading time: <\/span>7<\/span> minutes<\/span><\/p>\n\n\n

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TABLE OF CONTENTS<\/strong><\/h3>\n\n\n\n
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  1. Introduction<\/a><\/strong><\/li>\n\n\n\n
  2. Easiest Way to Invest in the S&P 500 Index<\/a><\/strong><\/li>\n\n\n\n
  3. What is the Best Brokerage Platform?<\/a><\/strong><\/li>\n\n\n\n
  4. Funding Your Account From Outside the US<\/a><\/strong><\/li>\n\n\n\n
  5. Is Index Fund Investing Profitable?<\/a><\/strong><\/li>\n\n\n\n
  6. Conclusion<\/a><\/strong><\/li>\n<\/ol>\n<\/div>\n\n\n\n
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    <\/a>1. Introduction<\/strong><\/h3>\n\n\n\n
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    Picture 1: Visualized S&P 500 Performance (Source: FinViz)<\/em><\/p>\n\n\n\n

    The S&P 500 Index could potentially help you grow your money at a relatively consistent rate of about 10% per year<\/a>. You\u2019ve searched the internet on how to invest and for some reason, you\u2019ve ended up in my blog, thanks to the wonderful thing known as SEO. Fret not, you are in the right place! I will show you everything you need to know, including the steps to start investing in the S&P 500 Index!<\/p>\n\n\n\n

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    <\/a>2. Easiest Way to Invest in the S&P 500 Index<\/strong><\/h3>\n\n\n\n

    The first step in starting this journey, is weirdly enough, choosing the right financial instrument. There is only 1 S&P 500 Index, but you are actually unable to buy the index directly. In order to invest in the S&P 500 Index, you\u2019ll need to invest in what is known as Mutual Funds<\/a> or Exchange-Traded Funds (ETFs)<\/a>.<\/p>\n\n\n\n

    Exchange-Traded Funds (ETFs) and Mutual Funds are essentially financial instruments that track the performance of these indices. ETFs that track indices are also generally known as Index Funds<\/a>.<\/p>\n\n\n\n

    To keep it brief, it\u2019s almost impossible to invest in US Mutual Funds if you\u2019re not a resident of the United States. This is due to the fact that there are some financial limitations as mutual funds are not publicly-traded like ETFs. It\u2019s still technically possible to invest in mutual funds if you\u2019re not from the US, but it\u2019s significantly more complex. Check out this guide from PocketSense<\/a> to learn more about this.<\/p>\n\n\n\n

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    Picture 2: ETF Venn Diagram<\/em><\/p>\n\n\n\n

    For ETFs, it behaves almost like a stock, but it\u2019s a basket of stocks that are traded under 1 ticker symbol. You can take a look at my step-by-step guide, all about ETF investing here<\/a>.<\/p>\n\n\n\n

    For the sake of simplicity, I would highly recommend just sticking with ETFs, as they are typically managed by big financial institutions, fees that are somewhat negligible and more-easily accessible, etc.<\/p>\n\n\n\n

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    <\/a>3. What is the Best Brokerage Platform?<\/strong><\/h3>\n\n\n\n

    Now that you know that Exchange-Traded Funds (ETFs) are the way to go for this, we\u2019ll get to the fundamentals of choosing your brokerage account.<\/p>\n\n\n\n

    A brokerage account is essentially the medium or platform that connects you to your financial investments. I\u2019d recommend slowly researching different brokers as different brokers offer different features and functionalities.<\/p>\n\n\n\n

    A good example would be if you\u2019re looking to buy VOO, one of the index funds that track the S&P 500 Index. In order to buy this ETF, you\u2019ll need access to a broker that is able to provide access to the US stock market.<\/p>\n\n\n\n

    If you come from a European country, you might be restricted from investing in US ETFs due to the PRIIP Regulations<\/a> set by the European Parliament. A work-around for this problem would be to opt for European ETFs that track the similar indices, for example the CSPX ETF (listed on the London Stock Exchange, UK) that is a mirror-image of VOO that tracks the S&P 500 index closely at an affordable expense ratio of 0.07% p.a. In this case, you\u2019ll need a broker that enables you to trade stocks and ETFs in the London Stock Exchange. If you need more help in choosing the right broker, I\u2019ve made a video about comparing 14 different brokers that cover many different aspects. I\u2019d highly recommend checking it out<\/a>.<\/p>\n\n\n\n

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    <\/a>My Personal Choice<\/strong><\/h4>\n\n\n\n

    For me, I personally really like Interactive Brokers (IBKR)<\/a>, as they tend to have the lowest fees, is heavily-regulated and are one of the most flexible brokers, outside of the US. I\u2019ve been researching and creating content on different brokers for as long as I can remember, and I can say with confidence; no other broker comes close to what IBKR has to offer.<\/p>\n\n\n\n

    If you\u2019re looking for a hassle-free broker that probably has one of the best features that any brokerage platform has to offer, IBKR is definitely for you.<\/p>\n\n\n\n

    Check out my informative video guide on how to kick-start your investing journey with IBKR:<\/p>\n\n\n