The Standard & Poor's 500, most commonly referred to as S&P 500, is a stock market index that monitors the performance of 500 large-cap corporations in the United States. Also known as SPX500 or US500, it depicts the stock market's performance by giving information on the risks and returns of the major businesses. Investors use it as the market's standard against which they measure the performance of all other investments.
What's interesting is that you can invest on this index via eToro and if you'd like to know more, then be sure to finish reading this article until the end so you will be more informed.
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77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
History of S&P 500
Standard & Poor's originally released the S&P 500 index on March 4, 1957, and McGraw-Hill bought it in 1966. It is owned by S&P Dow Jones Indices, a joint venture between S&P Global (previously) McGraw Hill Financial, CME Group, and News Corporation, the same company that owns Dow Jones.
The S&P500 index was worth nearly 700 after its first 10 years. It gradually declined from the mid-1960s to early 1981, while the US economy went through a period of stagnation.
Over the course of 2008-2010, during the financial crisis and the subsequent Great Recession, the S&P 500 fell 57.7% from October 2007 to March 2009.
In 2020, the coronavirus pandemic impacted the global economy and equity markets significantly. The index dropped by a third in a single year while stocks in Asia and Europe were also dragged down, though not to the same extent. The earnings recession was exacerbated by political instability in several countries, leading to a general fall in trade volume.
Factors to Consider When Trading S&P 500
A factor that will impact the S&P 500 is the import and export industry, closely related to supply and demand locally and internationally. Most investors who trade on this index must be aware of internal and external factors that will influence and affect even the slightest market movement.
Getting to this point is as simple as following the S&P trading charts and trends of the components. You need to ascertain that you are tracking changes in economic benchmarks that directly impact US stocks and indexes, such as the employment and unemployment rates, gross domestic product statistics, interest rate rises or decreases, import and export laws, and political developments.
How to Trade S&P 500?
The S&P 500 (USA 500) index can trade indirectly through the use of mutual funds or exchange-traded funds (ETFs) that are composed of stocks or futures, or it can exchange directly through the use of CFD's. Stock or futures purchases from each of the 500 firms in the S&P 500 index may utilize to simulate S&P 500 trading.
Maintaining the proper mix of shares in the basket, on the other hand, would be challenging and time-consuming to do. In addition, trading mutual funds or exchange-traded funds (ETFs) that represent S&P 500 stocks or futures in their baskets is another option available to traders who work through a broker. These have previously been representative of the index's constituents. Brokers vary in commission costs and may execute orders slower than other top options.
Trading S&P 500 via ETFs
The ETF is traded like a stock throughout the trading day at price volatility, and it often tracks the S&P 500 index. Although the traders in these funds do not directly own the underlying investments, they do have an indirect claim to a part of the earnings and remaining value after the fund closes. Ownership of their shares or interest can easily be bought and sold on the secondary market.
Trading on ETF offers versatility, liquidity, and low trading costs. The exchange-traded fund allows investors to purchase multiple shares, stocks, or bonds at once. Investors' money is being used to invest for a specific purpose that if traders buy an S&P 500 ETF, their money will invest in 500 companies in that index.
Trading S&P 500 via Futures
Trading in futures allows traders to purchase or sell a contract on a financial index that has been fixed at a future date and speculates on where prices are moving for indexes such as the S&P 500. Futures track the stock price in the underlying index. In other words, the S&P 500 index tracks the stock prices of the 500 largest companies in the US.
It also represents margin on futures which is not the same as margin for stock trading. Futures margins must be offset or settled to the trading.
Trading S&P 500 via CFDs
The S&P 500 traders will buy a contract for a difference (CFD) 's instrument from a CFD provider. It will reflect the price of the S&P 500 Index traded on the US stock exchanges. It allows them to transact the index using leverage, which they will only put a fraction of the value of their position when they enter a trade.
The CFD brokers will expand the spread a little, but they will not charge investors any direct commission for the trading. Two ways to trade; futures CFD involves opening buy or sell positions on an instrument and taking profit or loss on the difference in the instrument price from the beginning to the end of the transaction. In the CFD options, traders can predict the strike price of an underlying instrument such as stock and index.
Trading S&P 500 CFDs with eToro
The S&P 500 is a commonly used index for assessing the performance of the American economy since it tracks the share prices of 500 major corporations listed on US stock exchanges. Along with the S&P 500, eToro offers a comprehensive choice of trading options.
Trading can be quite a challenge; fortunately, the eToro platform is user-friendly and enables traders and investors to trade a broad range of major stock indices.
The corporations’ over 2000 individual equities are traded on a variety of global stock exchanges. If an investor or trader is interested in trading the S&P 500 on an online platform, eToro is an excellent option to consider.
The platform provides a robust feature set while still maintaining a clean and friendly user interface for its users. Creating and funding a brokerage account is a simple and easy procedure. Once the funds have been received and cleared, traders can purchase an S&P 500 index fund with a few simple clicks.
How to Trade S&P 500 in eToro?
- Create an account on eToro or log-in your account for existing users.
- Click "Discover".
- Select "Indices".
- Look for "SPX500".
- Select BUY or SELL.
- Key in your desired amount to invest or the number of S&P 500 units you want to trade.
- Review and set the stop loss, leverage, and take profit parameters.
- Select "Open Trade".
Is It Wise to Invest in S&P 500?
There are undoubtedly numerous advantages to investing in the S&P 500. For starters, the index provides broad exposure to companies throughout the United States. Moreover, historically, the index has provided investors with excellent returns, averaging over 10% yearly.
With the S&P 500, they will have exposure to a diverse range of top firms, which is ideal if investors want to diversify their portfolios. They can invest in S&P 500 in several ways, depending on investors' financial objectives, whether short- or long-term.
Ready to trade S&P 500 with eToro?
eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFDs.
Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
Past performance is not an indication of future results. Trading history presented is less than 5 complete years and may not suffice as basis for investment decision.
Copy Trading does not amount to investment advice. The value of your investments may go up or down. Your capital is at risk.
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eToro USA LLC does not offer CFDs and makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication, which has been prepared by our partner utilizing publicly available non-entity specific information about eToro.