What is the US S&P 500? The Standard and Poor's 500, or simply the S&P 500, is a stock market index that tracks 500 large companies listed on stock exchanges in the United States. [Wikipedia]. This is being used as a benchmark for the US stock market. If you invest in the S&P 500, you are technically betting on the US economy.
This is just a rough guide of how you can start. There are two ways you can do this:
Feeder Funds (UITFs)
International Stock Brokers
Feeder funds work like mutual funds, it invests its capital to a "master" fund. The company that handles the feeder fund pools the fund and will handle all the management. It's technically a "fund of funds".
Pros: Very Accessible as you can just go to the bank that owns the UITF. Some funds are also offered with Peso denomination, so you don't need a USD account to invest!
Cons: Extra overhead fees because the company owning the UITF acts as the middle man. For those who want to consider the peso denomination, you may need to be extra vigilant on exchange rates and how they will affect the overall fund performance.
There are several feeder funds that target a fund following the US S&P 500. I'll just feature two of them.
Target Fund: SPDR® S&P500® ETF Trust (SPY)
Fee: 0.75% per annum + SPY fee at 0.0945% p.a = 0.8445% p.a
Minimum Initial Investment: $1,000 (₱50,000 for Peso denomination)
Minimum transaction amount: 500USD (₱10,000 for Peso denomination)
SB U.S. Equity Index Feeder Fund (No Peso Denomination)
Target Fund: Vanguard Total Stock Market ETF (VTI)
Fee: 0.71% per annum + VTI fee at 0.04% p.a = 0.75% p.a
Minimum Initial Investment: $1,000
Minimum transaction amount: $500
I did hear about East West and BDO having Index funds, so worth checking them all out. In picking a Feeder Fund, I would be conscious of the fees. I will create a separate blog post on why fees matter and why it will bite you on the back in the long term.
For International Stock Brokers, if you're going to go long term, I will recommend the large US brokers like TD Ameritrade and Interactive Brokers (IBKR). Etoro is only good for the short-term because it only offers you CFDs (Contract for Difference). In layman's term, you don't own the underlying asset, but you can participate in the price action. I went with IBKR because the onboarding was very hassle-free.
Pros: You save on those management fees!
Cons: You'll need to Wire in those USDs to TD Ameritrade or IBKR which will incur some extra fees as well. You may be able to save by using some hacks like using WISE to wire money to IBKR.
Whatever option you take, you've already started your US Stock market investing journey! It always depends on what works best for you. Consistency is key to success. Happy investing!
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