What is an S&P 500 ETF?
Nov 5, 2026
The S&P 500 is one of the most widely followed stock market indices in the world. Many investors get exposure to it through exchange-traded funds, or ETFs, that track the index. This guide explains what the S&P 500 is, how an S&P 500 ETF works, the difference between accumulating and distributing ETFs, and the main risks to be aware of.
What the S&P 500 is
The S&P 500 is an index of 500 leading companies listed in the United States. It was launched in 1957 and is managed by S&P Dow Jones Indices. According to S&P Dow Jones Indices, it covers about 80% of the available market capitalisation of US shares, which is why it is often used as a gauge of the large-company US stock market.
Companies are chosen by an index committee, based on rules that include size, the number of shares available to trade, trading activity and profitability. The list is reviewed regularly, and companies can be added or removed. Because some companies have more than one class of shares in the index, the index usually holds slightly more than 500 shares.
How the index is weighted
The S&P 500 is weighted by float-adjusted market capitalisation. This means larger companies have a bigger weight in the index, and only shares that are available for public trading are counted. As a result, a small number of very large companies, many of them in the technology sector, can make up a large part of the index. Price movements in these companies can have a big effect on the index as a whole.
What an ETF is
An ETF is an investment fund whose shares are traded on a stock exchange, like the shares of a company. Most ETFs are designed to track an index. Instead of buying the shares of hundreds of companies one by one, an investor can buy units of one ETF that holds those shares.
ETF prices change during the trading day, in line with the value of the fund's holdings. The fund charges a yearly fee, called the ongoing charge or total expense ratio (TER), which is taken from the fund's assets.
How an S&P 500 ETF works
An S&P 500 ETF aims to follow the performance of the S&P 500. Most do this through physical replication: they buy the shares in the index in roughly the same proportions as the index. When the index changes, the fund adjusts its holdings.
The fund's return will not match the index exactly. Costs, cash held by the fund and the timing of trades can create small differences, known as tracking difference.
Accumulating and distributing ETFs
Many companies in the S&P 500 pay dividends. An ETF can handle these dividends in two ways:
- Accumulating (Acc): the dividends are reinvested in the fund, so they are reflected in the fund's price rather than paid out
- Distributing (Dist): the dividends are paid out to investors, usually several times a year
The choice does not change what the fund invests in. It changes whether income is paid out or kept in the fund.
Two examples: CSPX and VUSA
Two of the S&P 500 ETFs available on Investing.one are:
- iShares Core S&P 500 UCITS ETF USD (Acc) (CSPX.ETF): domiciled in Ireland, launched in 2010, uses physical replication and reinvests dividends. Its ongoing charge is 0.07% a year.
- Vanguard S&P 500 UCITS ETF (USD) Distributing (VUSA.ETF): domiciled in Ireland, launched in 2012, uses physical replication and pays out dividends quarterly. Its ongoing charge is 0.07% a year.
Both funds track the same index and are UCITS funds, a European framework with rules on diversification, liquidity and investor protection.
What to consider
When looking at any S&P 500 ETF, investors often consider:
- the ongoing charge and other trading costs
- whether the fund is accumulating or distributing
- the currency the fund is priced in and the currency of their own account
- the size of the fund and how actively it is traded
- how closely the fund has tracked the index over time
Risks
An S&P 500 ETF spreads money across hundreds of companies, but it still carries risks:
- Market risk: share prices can fall, and the value of the fund can go down as well as up
- Concentration: the fund invests only in US companies, and a small number of large companies make up a large share of the index
- Currency risk: the companies in the index are valued in US dollars. For investors whose money is in euros or another currency, changes in exchange rates can increase or reduce returns
- Tracking difference: the fund's return can differ from the index's return
- Taxes: dividends and gains may be taxed, depending on where the fund and the investor are based
What this means for investors
For Investing.one users, S&P 500 ETFs such as CSPX.ETF and VUSA.ETF are one way to follow the large-company US stock market through a single instrument. Before investing, it is important to understand how the fund works, its costs and its risks, and to read the fund's key information document.
Sources
- Vanguard: S&P 500 UCITS ETF (USD) Distributing
- iShares: iShares Core S&P 500 UCITS ETF
- S&P Dow Jones Indices: S&P 500
- S&P Dow Jones Indices: S&P U.S. Indices Methodology
This is not investment advice. Your capital is at risk.
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