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Best S&P 500 Index Trading Brokers

S&P 500 which stands for Standard and Poor’s 500 is a stock market index reflecting the performance of 500 of the largest American companies. Unlike Dow Jones, which is a price-weighted index, the US500 is calculated by adding the float-adjusted market capitalization of all constituent companies. It is for this reason that many trading professionals define S&P 500 as the true indicator of the US economy although it is not as widely known to the general public as DJIA.

The inclusion criteria for Standard and Poor’s 500 are strictly defined and exclude the presence of subjectivity in the selection process. As per an announcement published in March 2022, the market capitalization of each company must be at least $14.6 billion with the minimum trading volume in the last six months being 250,000 shares. Currently, the Top 5 S&P 500 companies are Apple, Microsoft, Alphabet, Amazon, and Meta Platforms.

How S&P 500 Trading Works for Traders and Brokers

How S&P 500 Trading WorksThe reason for the significant interest in US500 both on behalf of brokerage companies and traders lies not only in the presence of popular entities such as the ones mentioned above. It is also in the fact that the constituents of the index represent 80% of the US stock market capitalization which means trading brokers are offering a large basket of stocks that can be purchased in just one move.

Those traders who want to invest in S&P 500 and thus gain exposure to all the stocks in it may do so through mutual funds or exchange-traded funds (ETFs) offered by US500 trading brokers (full-service brokers or discount brokers). Although this stock index covers US companies only there are no country restrictions neither on the brokerage companies nor on traders.

Exchange-traded funds

Passive index replication is the characteristic of ETFs and investors have access to all the stocks in the index. Generally, exchange traded funds are low-cost, highly liquid, and subject to intraday price variability.

Mutual funds

Index funds come with considerable operating costs which usually lead to higher fees and commissions charged by the brokerage companies. Funds’ goal is to duplicate S&P 500 performance by purchasing a basket of securities. Then, you can buy shares of the fund and trade them. What is specific about mutual funds is that they can be bought at the day’s closing price only which is based on the net asset value.

Top S&P 500 Trading Brokers

choosing a brokerWhether you are planning to invest in mutual funds or ETFs, take some time to select a trustworthy S&P 500 brokerage company that will meet your requirements and manner of trading. The below list of trading brokers is not a ranking but rather a compilation of reputable trading platforms whose EU and non-EU leverage, spreads, commissions, and other features are reviewed by our team.

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S&P 500 FAQ

1. Will I receive dividends from S&P 500?

Do not expect dividends directly from S&P 500 since it is an index and indices are not investment securities. However, if you invest in mutual funds and ETFs that are known for replicating the performance of US500 you may be paid dividends.

2. What is the average price return of the S&P 500?

As per 2021 official data, the 5-year annualized return of the index is 18.48%. This last period is not indicative of the historical performance of the US 500 as there were abnormally high returns compared with past years. For example, if we look further back in time, we will see that the 15-year annualized return was 10.66%.

3. How is the S&P 500 different from the Dow Jones?

The biggest difference is in the way each index is calculated. DJIA is a price-weighted index while US500 gives a higher percentage allocation to entities with larger market caps. The S&P 500 is considered as the better reflector of the US economy current state due to its broader coverage. On the other hand, being composed of companies coming from multiple industry sectors, it appears to be more volatile than DJIA.

4. What are S&P 500 trading hours?

Most traders prefer executing deals between 9:30 am and 4:00 pm as these are the regular trading hours of the New York Stock Exchange (NYSE) and the Nasdaq Stock Market (Nasdaq). Furthermore, there is the option of pre-market trading that can start as early as 4:00 am and also after-market sessions that can extend the trading period until 8:00 pm.

5. Do I have other variants to trade S&P 500 besides mutual funds or exchange-traded funds?

Yes, ETFs are far not the only instrument to trade S&P 500. Based on your experience and preferred manner of trading, you can also use S&P 500 CFDs (contracts for difference), futures, and options. Future contracts bind you to exchange an asset at a pre-set price on a fixed date while with options this is a right, not an obligation.