Top S&P 500 ETFs listed on the ASX to watch

The S&P 500 is one of the most widely followed stock market indices in the world, and for good reason. It tracks the performance of 500 of the largest publicly listed companies in the United States. For local investors, S&P 500 ETFs listed on the ASX provide a way to gain exposure to the US market without needing to open an international brokerage account or manage foreign currency.

The S&P 500 has historically delivered strong returns over certain periods, though past performance is not a reliable indicator of future results. It has become a commonly referenced benchmark for many investors worldwide. Thanks to ASX-listed ETFs, Australians can now access this exposure without needing to trade on US exchanges directly.

But what exactly are ASX-listed S&P 500 ETFs and why are they so popular with Australian investors? This guide explains the key concepts and outlines four available options on the ASX.

Key takeaways

• The S&P 500 index tracks 500 of the largest US companies, including Apple, Microsoft, Amazon and other household names.

• An S&P 500 ETF lets you invest in the broader US market through a single ASX-listed fund.

• S&P 500 ETFs may help diversify a portfolio and generally offer relatively high liquidity, though this can vary and does not eliminate investment risk.

• Your options range from unhedged (IVV) and hedged (IHVV) index trackers to equal-weight (QUS) and income-focused (UMAX) strategies.

• Management fees, market volatility, currency risk and more are all important considerations.

• You can invest in S&P 500 ETFs on the CMC Invest platform along with other ASX-listed ETFs.

What is the S&P 500 index?

The S&P 500 is a US stock market index that measures the performance of 500 large-scale companies listed on American stock exchanges. The companies are from a wide variety of sectors – from technology and healthcare to financials and consumer goods – which is one reason why the index is widely regarded as a broad measure of overall US equity market performance.

Some of the most well-known companies in the index include Apple, Microsoft, Amazon, NVIDIA and Alphabet (Google’s parent company). It’s a market-capitalisation weighted index, which essentially means that larger companies have more influence on its performance.

What is an S&P 500 ETF?

An S&P 500 ETF is an exchange-traded fund set up to track the performance of the S&P 500 index. Buying units in an S&P 500 ETF means you’re effectively investing in a basket of 500 top US companies through a single transaction.

If the S&P 500 index goes up, the value of your investment in the ETF rises with it (minus fees). If the index goes down, the value of your investment will generally fall in line with it (minus fees), though the extent may vary depending on the fund's structure. Australian S&P 500 ETFs are popular among investors who already know how to invest in ETFs and want to gain exposure to the broader US market without picking individual stocks.

Why S&P 500 ETFs are a popular investment among Australian investors

The popularity of S&P 500 ETFs continues to increase among Australian investors – but why?

• Exposure to large global companies from Australia: Investing in an S&P 500 ETF provides exposure to a broad range of large US-listed companies, including Apple, Microsoft, and Amazon, accessible through an ASX brokerage account.

• Portfolio diversification: Instead of buying individual stocks, an ETF provides exposure to a basket of companies across multiple sectors. This diversification can help reduce the impact of a downturn in any single company or industry.

• Cost-effective: Buying a single S&P 500 ETF may, in some cases, involve lower transaction costs than purchasing individual US stocks, though investors should review all applicable fees before making a decision.

• Liquidity: S&P 500 ETFs listed on the ASX can generally be traded during Australian market hours, which may suit investors seeking relatively straightforward access to US equity exposure, depending on their individual circumstances.

Top S&P 500 ETFs listed on the ASX

Below we’ve compiled four of the most popular ASX S&P 500 ETFs available to Australian investors. Take note of how they differ in their approaches to tracking the US market so you can consider which approach may align with your investment objectives and risk tolerance.

1. iShares S&P 500 AUD ETF (ASX: IVV)

IVV is the largest and most traded S&P 500 ETF on the ASX. Managed by BlackRock, it tracks the performance of the S&P 500 index in Australian dollar terms. IVV has a management fee of 0.03% per annum, which is among the lower fee structures available for this type of fund, though investors should review all costs and features before investing.

IVV is unhedged, which means returns are influenced by movements in the AUD/USD exchange rate. When the Aussie dollar weakens against the US dollar, returns may be higher in AUD terms; however, when it strengthens, returns may be reduced.

2. BetaShares S&P 500 Equal Weight ETF (ASX: QUS)

Unlike traditional market-cap-weighted S&P 500 ETFs, QUS gives equal weight to each company in the index. In other words, smaller companies within the S&P 500 have the same influence on performance as the largest, which reduces concentration risk in mega-cap technology stocks.

QUS has a management fee of 0.29% per annum and is currency hedged, so it tries to minimise the impact of AUD/USD exchange-rate movements on returns. It may appeal to investors seeking more even exposure across the full index, though as with all investments, individual objectives and risk tolerance should be considered.

3. iShares S&P 500 (AUD Hedged) ETF (ASX: IHVV)

IHVV tracks the same S&P 500 index as IVV but includes a currency hedge that intends to reduce the impact of fluctuations in the AUD/USD exchange rate. In other words, returns more closely match the performance of the underlying US companies instead of currency movements.

IHVV has a management fee of 0.10% per annum. Investors who are concerned about the potential impact of AUD/USD movements on their returns may find a currency-hedged structure worth exploring, though currency hedging does not eliminate all risks and involves its own costs and considerations.

4. BetaShares S&P 500 Yield Maximiser Fund (ASX: UMAX)

UMAX takes a different approach by combining S&P 500 exposure with a “covered call strategy”, which involves writing call options over the portfolio to generate extra income, which is then distributed to investors as regular payments.

UMAX has a management fee of 0.79% per annum – higher than passive index trackers – but may be of interest to investors who prioritise income distributions alongside equity exposure. Investors should review the fund's structure, risks and fees before investing. The trade-off is that the covered call strategy can limit upside potential during strong bull markets.

How to invest in S&P 500 ETFs in Australia: Step-by-step guide

1. Open an account with CMC Invest: You can create an account online. CMC Invest provides access to ASX and international markets alongside research tools and educational resources, all within one platform.

2. Research S&P 500 ETFs listed on the ASX: Use the tools on CMC Invest, like Market News and the Knowledge Hub, to compare different S&P 500 ETFs. Make sure you factor in management fees, currency hedging, fund structure, your investment goals and your overall risk appetite.

3. Place your order: Search for the ETF by its ticker code (e.g. IVV, IHVV, QUS or UMAX), look into the PDS and relevant recent announcements, check all the fees and then you can place your order through the CMC Invest platform – just like you would buy regular ASX stocks.

Risks and considerations when buying S&P 500 ETFs listed on the ASX

• Management fees: While generally low, fees differ between products and eat into your returns over time, so make sure you’re comparing fees before picking an ETF.

• Market volatility: The US equity market can experience big short-term price swings. The value of your investment can go down as well as up. It’s a good idea to get to grips with the risks of investing.

• Currency risk: For unhedged ETFs like IVV, movements in the AUD/USD exchange rate will affect your returns. A strengthening Aussie dollar will lessen returns from US investments, whereas a weakening dollar can boost them. Currency-hedged options like IHVV and QUS aim to minimise this effect.

Conclusion

S&P 500 ETFs listed on the ASX allow Australian investors to gain exposure to the world’s largest economy. Whether you prefer a low-cost index tracker, a currency-hedged option or an income-focused strategy, there may be an ASX S&P 500 ETF worth exploring, depending on your individual investment objectives, risk tolerance and financial circumstances.

Disclaimer: This article provides general information only. It has been prepared without taking account of your objectives, financial situation or needs. It is not to be construed as a solicitation or an offer to buy or sell any financial instruments, or as a recommendation and/or investment advice. It does not intend to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any financial instruments. You should consider your objectives, financial situation and needs before acting on the information in this article. CMC Markets believes that the information in this article is correct, and any opinions and conclusions are reasonably held or made on information available at the time of its compilation, but no representation or warranty is made as to the accuracy, reliability or completeness of any statements made in this article. CMC Markets is under no obligation to, and does not, update or keep current the information contained in this article. Neither CMC Markets nor any of its affiliates or subsidiaries accepts liability for loss or damage arising out of the use of all or any part of this article. Any opinions or conclusions set forth in this article are subject to change without notice and may differ or be contrary to the opinions or conclusions expressed by any other members of CMC Markets.