Today, we’d like to talk about one of the most well-known stock market indices—the S&P 500. You’ve probably heard of it, and for a good reason. It’s one of the most important financial benchmarks in the world, reflecting the performance of the 500 largest publicly traded companies in the U.S. S&P 500 for Beginners is a great starting point for those looking to understand how this index works. Investors worldwide use the S&P 500 as a key indicator of the overall state of the American economy. Some rely on it to assess and refine their investment strategies.
In this article, we’ll break down what the S&P 500 is, its key features, how it has performed over the past five years, and the different ways to invest in it. We’ll also explore where you can safely buy it in the U.S., Canada, the UK, and Australia. And, as always, we’ll wrap up with an FAQ section answering the most common questions on this topic.
What Is the S&P 500 Index?
A bit of history: The S&P 500 (Standard & Poor’s 500) was established in 1957 and is one of the oldest stock market indicators. It includes companies traded on the largest U.S. stock exchanges—the New York Stock Exchange (NYSE) and NASDAQ. The index covers a wide range of industries, including technology, healthcare, finance, consumer goods, and energy. This broad diversification helps reduce volatility, as declines in one sector can be offset by gains in others.
Key Features
To put it simply, the S&P 500 has three defining characteristics. The first is market capitalization-based ranking. The index is weighted by market capitalization, meaning that larger corporations have a greater influence on its overall performance. For example, tech giants like Apple (AAPL), Nvidia (NVDA), and Amazon (AMZN) significantly impact the index. As of February 2025, these three companies alone have a combined market capitalization exceeding $9 trillion (!).
The second is broad diversification. As mentioned earlier, the S&P 500 represents around 80% of the total U.S. stock market capitalization, covering companies from various industries. This diversity makes it a reliable indicator for assessing the overall health of the U.S. economy.
And third, regular rebalancing. The index is continuously updated to reflect market changes. It’s not just a historical measure from 1957—it evolves to stay relevant. Companies can be added or removed based on their market capitalization, liquidity, and other key criteria, ensuring that the index remains a dynamic and up-to-date representation of the U.S. stock market.
S&P 500 Performance: How the Index Has Grown in the Last 5 Years
The numbers are truly impressive: over the past five years (from February 2020 to February 2025), the S&P 500 has surged by 80.66% (!). What does this indicate? First, it’s a sign of stable capitalization growth. Second, it reflects investors’ confidence in the fundamental strength of the companies within the index.
In 2024 alone, the index gained another 20%, signaling positive market sentiment. Over the last 6 months (from August 2024 to February 2025), the S&P 500 rose by 13%, highlighting the continued investor interest, particularly in the high-tech sector.
As for 2025, even though the year has just begun, the index has already grown by 2%. However, this number could have been higher if not for the market turbulence caused by DeepSeek—yes, the very same Chinese competitor to ChatGPT that, within just a few days, wiped $1 trillion off the stock market.
screenshot: tradingview.com
Ways to Invest in the S&P 500 in 2025
Before exploring investment options, remember that this website provides information only and does not offer financial advice. Now that the formalities are out of the way, let’s take a quick look at the most common investment methods, along with their risks and benefits.
1. Buying ETFs
One of the most popular ways to invest in the S&P 500 is through exchange-traded funds (ETFs). Funds like SPDR S&P 500 ETF Trust (SPY), Vanguard S&P 500 ETF (VOO), and iShares Core S&P 500 ETF (IVV) closely track the index’s composition and performance.
ETFs offer key advantages, such as low fees that attract beginners and easy purchasing through any broker, just like stocks.
2. Buying Individual Stocks from the Index
Another option, especially for beginners, is to buy individual stocks from the S&P 500 instead of the entire index. A quick Google search will reveal which companies are included in the index, allowing you to invest in specific stocks such as Apple (AAPL), Nvidia (NVDA), or Tesla (TSLA).
The main advantage of this approach is that you earn both from stock price growth and dividends. However, there are drawbacks. First, you will likely pay a trading fee for each stock purchase. Second, you won’t be able to replicate the full diversification of the S&P 500—most investors typically hold 10-30 stocks, which doesn’t provide the same level of risk reduction as owning all 500 companies.
3. Investing Through Index Funds
Index funds, which track the S&P 500, suit long-term investors who prefer fewer trades. The main difference: ETFs function like stocks, allowing investors to buy or sell them anytime during market hours. In contrast, investors acquire index funds directly from an asset manager, and trades occur once a day at the closing price. In short, ETFs offer flexibility, while index funds are better for hands-off, long-term investors.
The benefits of index funds include lower fees compared to actively managed funds and the ability to automatically reinvest dividends.
Where to Buy S&P 500 ETFs in the US, Canada, the UK, and Australia in 2025?
Let’s briefly go over the best options for each country.
In the United States, Fidelity remains one of the most popular brokers, offering zero commissions on ETF purchases, making it ideal for long-term investors. Charles Schwab also continues to provide access to key S&P 500 ETFs with low fees, though its somewhat complex interface may be intimidating for beginners. For active traders, E*TRADE is a solid choice, featuring powerful analytical tools, although some transactions may incur fees.
In Canada, Questrade remains a great option, as it allows commission-free ETF purchases, though there are small fees when selling. Wealthsimple Trade offers completely free trading, making it beginner-friendly, but its limited selection of markets and ETFs may not satisfy advanced investors. Interactive Brokers (IBKR) is another top choice, especially for active traders and those seeking access to international ETFs, though its interface requires some learning.
For the United Kingdom, Hargreaves Lansdown remains a reliable choice, offering access to iShares S&P 500 (CSP1), but beware of relatively high fees. Freetrade attracts long-term investors with commission-free ETF trading and an intuitive platform, though it offers a limited ETF selection. Interactive Brokers (IBKR) appeals to UK investors with low fees and global ETF access, but its interface challenges beginners.
Lastly, in Australia, CommSec is one of the most popular platforms, providing access to IVV (the S&P 500 ETF) on the ASX, though its fees are higher than those of competitors. SelfWealth is another great option, offering low fixed commissions and access to US-listed S&P 500 ETFs, though it lacks advanced analytical tools. Pearler is a good choice for passive investors. It supports auto-investing in S&P 500 ETFs, but it’s specifically designed for long-term investments.
In conclusion
S&P 500 index is an great investment tool not for beginners and not only for U.S. investors but also for those looking to diversify their portfolio globally. However, it’s essential to remember the risks involved and the importance of conducting thorough research before investing. Start small, stick to your personal strategy, and stay focused on your long-term financial goals. We consider the S&P 500 a strong investment for the future. If you are interested in the topic about cryptocurrencies, we recommend you to pay attention to our popular article: Bitcoin vs. Ethereum: What to Expect in February 2025?
FAQ: S&P 500 for Beginners: How to Start Investing in 2025
1. Why is investing in an S&P 500 ETF beneficial?
First, because of its diversified portfolio, which helps reduce risk. Second, it provides access to the largest U.S. companies, making it a strong option for long-term investment.
2. What are the most popular S&P 500 ETFs?
The most well-known funds include SPDR S&P 500 ETF (SPY), Vanguard S&P 500 ETF (VOO), and iShares Core S&P 500 ETF (IVV).
3. Do S&P 500 ETFs pay dividends?
Yes, most S&P 500 ETFs pay dividends, which investors can either receive as income or reinvest for compound growth.
4. Is it worth investing in an S&P 500 ETF in 2025?
Most likely, yes—but always consider potential risks. The S&P 500 remains one of the most reliable instruments for long-term growth. Over the past five years, the index has gained over 80%. In 2024 alone, it grew by more than 20%.
