I see there are various S&P 500 choices, where is the main one that i see has a value of 4,090.46 at present? I’m using the Trading 212 Invest selection btw as opposed to the T212 CFD or ISA.
Can anyone help me with how I can invest in the S&P 500, the main one? Thanks.
You can literally search in the app for S&P and loads come up?!?!?
The number you are quoting is the index benchmark. It’s just a notional number from when the index launched to show the return 
There is only one S&P500, it is an index, and you cannot invest into it.
From this index, many fund providers are serving ETFs tracking such index; those you can invest into.
The main fund providers are BlackRock, Vanguard and Invesco. They will all have a few variants available.
The two main distinctions you will have are
(1) different currency quoting (mainly USD, EUR, GBP); note that this does not change your own returns at all, it is just a matter of flavour.
(2) Distributing or accumulating; a Distributing fund will have a few dividends in the year (usually 2 or 4) to distribute the dividends from the underlying companies. An Accumulating fund will instead reinvest the dividends received, which will be reflected in the ETF’s price.
An other variation you might find would be a Currency Hedge, offered in GBP or EUR; in which case, the FX effects of converting from USD to EUR/GBP will be nullified, allowing to copy the USD returns of the index.
Hope this helps!
2 Likes
Well spoken @Zergui i cant offer anymore than already spoken. However as personal preference not an advice, i would opt for the GBP denomination as based in the UK.
reading between the lines of your 2nd to last paragraph, is the USD returns of the index with hedging more advantageous to UK/EU investors?
1 Like
It is worth remembering that both distributing and accumulating versions can produce UK taxable dividends, if you are a UK resident. People sometimes forget that the dividends that are reinvested in accumulating funds are nonetheless taxable. As the tax free dividend allowance is reducing to ÂŁ1000 next tax year, and ÂŁ500 thereafter, more and more people may have taxable dividends in an invest account.
Personally, in a taxable account, I prefer to own distributing ETFs since the taxable amount is more transparent. With accumulating funds I have to look up the dividend at the issuer’s website and adjust my cost basis.
See FAQ for Tax in the United Kingdom
There is a section about taxation of ETF dividends.
2 Likes
A valid question, if somewhat a little mislead; hedging is just that, a hedge.
If the FX were to move in your favour, your forgo these gains.
If the FX were to move against you, your returns would be protected.
The idea behind the hedge is about you wanting the performance of the index, investing in business risks in the US, but not willing to partake in currency risks.
Indeed @Richard.W! I’ve tried to keep it simple and to the point, but an ETF is a tax pass-through vehicle.
In other words, you will normally not be taxed on the distributions of the ETF, for a distributing ETF.
But you are liable for the taxes on all the dividends from the underlying companies, regardless of if the fund is Distributing of Accumulating.
The fund provider will provide annual documents of the underlying dividends to assist in your tax filing.
This is a surprise to me. Are you talking about UK taxation? Countries differ.
Suppose you own VUSA, distributing. As I understand, Vanguard Ireland pays 15% US withholding tax on US dividends and then distributes the remainder, less costs and fee. The UK taxpayer is then liable for UK dividend tax on that distribution, with no credit for the withholding tax that Vanguard has paid.
This means there is double taxation of US dividends, which can’t be helped. For a higher rate UK taxpayer, $100 of US company dividends paid to Vanguard within VUSA suffers a withholding tax cut of $15 and then the taxpayer suffers a second cut of $85x0.3375=$28.69. Total tax rate 43.69%. It means that from the viewpoint of tax efficiency with regard to dividends it is better to own US shares directly. In that case the US withholding tax can be credited against the UK tax due and the total tax is 33.75%. (For additional rate taxpayer effective rate on ETF dividends is 48.45%, and for basis rate taxpayer 22.44%)
A US taxpayer invests in VOO rather than VUSA. There is no withholding tax charged to VOO and so all the company dividends can be distributed, less Vanguard’s costs and fee. That is why the quoted yield on VOO exceeds that of VUSA.
The actual implementation of the tax liability will differ per country.
In my country I had no tax on the dividends - so only the sourced 15% withheld within the ETF.
In any case, when tax liability applies, the ETF itself doesn’t create any taxable event from holding assets/distributing dividends, it is a full pass-through vehicle.
Sales within the fund will create capital gains event, and dividends received will create dividend tax liabilities. The format of the fund (Acc/Dist) has no effect on those.
But tax reporting and taxes due will indeed vary per country.
Edit: I expect there should be on your gov’s tax website some helper regarding taxes and ETF/mutual funds.
Disclaimer: this absolutely not a tax official resources, and I’m not sure to which country’s public they are referring. I think Ireland.
But they paint an even worst picture as what I was saying.
Buying Exchange Traded Funds (ETFs) - Money Guide Ireland.
Edit: justETF mentions this for UK.
Tax liability for dividend, capital gain, regardless of fund format.
Unfortunately for the UK taxpayer, HMRC does not treat ETFs as pass through vehicles. Taxation is as I described above. It is the same with OEIC funds.
3 Likes
My account is in USD so I choose VUAA or VUSD.
Holding VUAA and VUSD will not make any difference to your UK tax liability if you are a UK taxpayer. But you will have the added burden of calculating the GBP value of dividends and gains by reference to a table of daily exchange rates from USD to GBP.
1 Like
Two further thought for the UK taxpayer. Many people like to hold both ETFs and individual stocks. Sometimes people ask, “What should I hold in my ISA?”.
-
Suppose you own both VUSA ETF and also a portfolio of some US stocks. Suppose the companies in both baskets pay a total of ÂŁ3000 of dividends per year (which is above the current UK ÂŁ2000 tax free dividend allowance). Then you will experience less over all dividend tax if you hold the ETF in your ISA and the stocks in your Invest account, rather than allocating the opposite way around.
-
Another interesting point concerns the overall cost of ownership. VUSA ETF costs 0.07% per year. A basket of US stocks bought on Trading 212 costs 0.15% in fx fees. VUSA currently yields 1.43%. If we owned the S&P 500 ourselves we would have a yield of about (1.43+0.07)/0.85 = 1.76%. Suppose we buy and hold for one year a basket costing ÂŁ1000 and mimicking the S&P, where dividends are taxed at 33.75% (for a higher rate taxpayer). Suppose we buy, hold for two years, collect the dividends, pay tax and then sell.
.
If there is no growth then the ETF returns £1018.95. The basket of US stocks returns £1020.29. If there is 8% growth the basket of US stocks is still better, even though our initial investment has been immediately reduced to £998.50 because of the fx charge. The basket of US stocks continues to outperform the ETF as the holding period increases. Only if the holding period is short, say one year, does the ETF do better (because it avoids the in and out 0.15% fx fee.) This is with holding in an Invest account. In an ISA the ETF does relatively better. It then takes a holding time of six years for the basket of US stocks to outperform the ETF. My conclusion is that for the long-term investor one should not buy VUSA ETF in preference to direct ownership of US shares simply to avoid Trading 212’s fx fee.
Has anyone read far enough to understand what I am saying?
5 Likes
I did, it’s an interesting comparison.
I think I’m right in saying if you hold US companies in a Sipp you pay zero withholding tax, which could be another consideration.
I’d also add that there’s an opportunity cost to individual shares, which is why I stick with collective investments.
I figure my time’s better spent on enjoying life and earning more to chuck into an ETF or trust than poring over accounts, reports etc.
3 Likes
In reference to S&P500 and investing in it.
2 Likes
That’s a nice plug, mate. 
2 Likes