Investing in US Market, S&P 500 Index: If Indian investors want to take advantage of the boom in the US stock market, then what will they have to do? The most straightforward answer to this question is, they can achieve this goal by investing in the S&P 500 ETF. As its name also suggests, the S&P 500 Index consists of the top 500 companies listed on the New York Stock Exchange of America. Obviously, investing in an ETF that tracks the S&P 500 index means that your investment is likely to grow along with the uptrend in this index.
Why do fund managers have so much confidence in the S&P 500?
Since January, the S&P 500 index, which shows the movement of shares of America’s top companies, has registered a rise of 19.22 percent. In comparison, India’s Nifty 50 index has seen a rise of 12.86 percent during this period. Fund managers expect the S&P 500 to rise by another 10 per cent by the end of 2021.
According to Bank of America’s July Fund Managers Survey, 82 percent of investors expect the S&P 500 index to rise by at least 10 percent more by the end of this year. Not only this, many investors are also expecting that in the next six months, there may be a bull run in the US market.
It is easy to invest in S&P 500 Index through ETFs
The question is, how can Indian investors take advantage of the huge upside potential of US companies in the S&P 500 index? An easy way out can be to invest in a good S&P 500 ETF. That is, an exchange-traded fund that tracks the S&P 500 index of the top 500 companies listed on the New York Stock Exchange. Exchange-traded funds’ returns generally coincide with the movement of the index they track. However, there may be some tracking error in it at times.
Here are the top ETFs to invest in the S&P 500:
The three largest ETFs that invest in companies included in the S&P 500 are:
Vanguard S&P 500 ETF: Vanguard is the largest S&P 500 ETF with net assets of US$753 billion. Its average trading volume is 39.8 lakhs. It has increased by 19.27 percent since January 2021.
SPDR S&P 500 ETF Trust: The SPDR S&P 500 ETF Trust is the second largest S&P 500 ETF with net assets of USD 374.03 billion. In this year so far it has increased by 19.29 percent. Launched in January 1993, the SPDR S&P 500 ETF is the first exchange-traded fund to be listed on the US stock exchange.
iShares Core S&P 500 ETF: The iShares Core S&P 500 ETF is the third largest S&P 500 ETF in the US with net assets of $286.99 billion. The fund has grown by 19.32 per cent so far this year. Its average volume is 45.3 lakhs.
Apart from these three top ETFs, many more asset management companies (AMCs) have different variants like leveraged and equal-weighted.
Benefits of Investing through ETFs
Exchange traded funds or ETFs can be bought or sold at any time during the trading hours of the stock market with the help of ETF brokers. Like shares, they also have their own special ticker symbol. A major advantage of this is that investors can keep a constant eye on their prices during the trading hours of the stock market. Also, the cost of investing in ETFs is also very low. The S&P 500 ETF that tracks the S&P 500 index includes giants such as Microsoft, Apple, Amazon, Facebook, Google, and Berkshire Hathaway.
(Story: Surbhi Jain)