The World's US Index

The S&P 500, the premier index for the US market, is now available in a multitude of ETFs

Morningstar ETF Analysts 22 July, 2010 | 11:55AM
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On May 17, 2010, the 10-year licensing agreement for the exclusive ETF rights to the S&P 500 index in Europe between Standard & Poor’s and iShares expired. Since then, a host of other ETF providers have swiftly reached agreement with S&P to create their exchange-traded funds tracking the index. With one of the oldest and most-tracked equity indices now investable on a multitude of exchanges across Europe and at a much lower price, investors should seriously consider adding it to their equity portfolio.

What is the S&P 500?
Standard & Poor’s created this index in 1957 as a broad measure of the US stock market. Currently, the index represents about 75% of the entire US stock market by market value. It is a free-float market capitalisation-adjusted index of 500 of the most widely held publicly-traded companies based in the US (with a handful of non-US companies grandfathered in). The S&P 500 committee chooses companies for inclusion based on market size, liquidity, and sector representation, guided by the principle “leading companies in leading industries.”

Why Should You Invest in the S&P 500?
While the Dow Jones Industrial Average may get more headlines, there’s no question that the S&P 500 is the most important equity index in the United States, and probably the world. There is more than $900 billion in assets indexed to the S&P 500, and almost $3.5 trillion in assets benchmarked to the index. The SPDR S&P 500 ETF, which trades on the New York Stock Exchange, is the most heavily traded security on the planet, and the iShares S&P 500 ETF trading in London is not only the largest US ETF in Europe, but the largest overall. The index’s popularity makes it the lowest-cost way to gain broad exposure to the biggest equity market in the world.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Morningstar ETF Analysts  research hundreds of ETFs available to European investors. The Morningstar Rating for ETFs is based on a risk-adjusted performance measure.