Best S&P 500 ETFs for Italians 2024

Why an S&P 500 ETF is a great investment for Italians

S&P 500 stands for the Standard & Poor’s 500 index. As the name suggests, it seeks to track the performance of a composition of the 500 largest American companies. Through the S&P 500, you get exposure to a large section of the US economy as it covers 80% of the total American market capitalisation.

Over the past few decades, the index has averaged annual returns of approximately 7-10% after adjusting for inflation. This robust performance makes it an attractive option for Italian investors looking to invest for mid-long terms. That’s a considerable return, especially if you began investing in the early nineties. The American stock market has outperformed the rest of the world these past decennia.

Investing in an S&P 500 ETF offers Italians a gateway to this growth with several benefits:

• Low-cost entry: ETFs typically have lower fees compared to actively managed funds.
• Diversification: spreads risk across 500 companies, reducing the impact of any single stock’s performance.
• Rooted in the real economy: reflects the broader U.S. economic trends.
• Tax efficient for Italians: favourable tax treatment compared to other investment vehicles.
• Accessible for Italians: you don't need a large sum upfront to start investing in ETFs, making it accessible to anyone (for instance for young people).

How to compare S&P 500 ETFs for Italy

When selecting an S&P 500 ETF, Italian investors should consider:

• Dividends & domicile: investing in distributing ETFs means you'll pay taxes on dividends as they're distributed, usually at a 26% rate in Italy. In contrast, with accumulating ETFs, you won't pay taxes on reinvested earnings until you sell the shares, allowing you to benefit from compound interest without immediate tax deductions. Tax rates also vary based on where the ETF is based. For example, Irish ETFs pay 15% on U.S. dividends, Luxembourg ones pay 30%. Your residency affects how much tax you'll pay on the dividends an ETF distributes to you. Due to these tax differences, choosing accumulating ETFs is usually a smarter tax move, delaying tax payments and potentially increasing your investment's growth over time.
• Currency: exposure to non-euro currencies adds currency risk.
• Fund size: a measure of liquidity and stability. A larger fund is less likely to be shut down.
• Replication method: physical or synthetic replication affects tracking precision.
• Total Expense Ratio (TER): directly impacts net returns. This is the cost fund manager charge for managing their funds.
• Broker fees: varies among brokers and changes yourtotal investment cost.
• Sustainability: some ETFs focus on ESG-compliant companies.

Read more on the criteria to select an ETF if you wish to learn more.

The best S&P 500 ETFs for Italians

Based on these criteria, we selected the following S&P 500 ETFs:

The cheapest S&P 500 ETF is Invesco's S&P 500 ETFs IE00B3YCGJ38 (accumulating) with a total expense ratio of 0.05%. If you are looking for physical rather than synthetic replication, we suggest you look at the two ETFs: iShares' IE00B5BMR087 or Vanguard's IE00BFMXXD54.

Read on for an in-depth comparison or else skip this section to see how to buy the S&P 500 in Italy.

iShares Core S&P 500 Accumulating (IE00B5BMR087)

iShares is a brand of BlackRock, one of the largest asset managers in the world. They are known to have a wide selection of cheap ETFs. This fund is the largest S&P 500 ETF available in Europe!

✅ Distribution of dividends. The fund is accumulating, meaning dividends are directly reinvested and no tax needs to be paid until the sale.

✅ Domicile. The fund is domiciled in Ireland, a tax-efficient location.

✅ Currency. The fund can be traded in euro on several stock exchanges.

✅ Size. The fund is the largest S&P 500 ETF available on the market, with over €50 billion under management.

✅ Replication. The fund is physically replicated.

✅ Cost. With a total expense ratio of 0.07%, the fund is one of the cheapest S&P 500 ETFs available.

✅ Broker fee. The fund is available on the Borsa Italiana, making the broker fee lower on average.

❌ Sustainability. The fund invests in all companies in the S&P 500 index, no matter how "bad" they are from an environmental, social or governance point of view.

Vanguard S&P 500 Distributing (IE00B3XXRP09)

Just like BlackRock, Vanguard is one of the largest asset fund providers and offers many index funds at a low price. However, you have to watch out with this fund as it's a distributing ETF.

❌  Distribution of dividends. The fund is distributing, meaning dividends are handed out on a quarterly basis. You'll have to pay a 26% tax rate for all dividends you receive.

✅ Domicile. The fund is domiciled in Ireland, a tax-efficient location.

✅ Currency. The fund can be traded in euro on several stock exchanges.

✅ Size. It has over €25 billion in assets.

✅ Replication. The fund is physically replicated.

✅ Cost. At 0.07%, it has the same price as the iShares S&P 500 core.

✅ Broker fee. The fund is available on the Borsa Italiana, making the broker fee lower on average.

❌ Sustainability. The fund invests in all companies in the S&P 500 index, no matter how "bad" they are from an environmental, social or governance point of view.

Invesco S&P 500 Accumulating (IE00B3YCGJ38)

At a total expense ratio of 0.05%, this fund is the cheapest S&P 500 ETF available on the market for Italians. But it comes at a small increase in risk, because the fund synthetically replicates the index instead of actually buying the stocks in the index.

✅ Distribution of dividends. The fund is accumulating, meaning dividends are directly reinvested and no tax needs to be paid until the sale.

✅ Domicile. The fund is domiciled in Ireland, a tax-efficient location.

✅ Currency. The fund can be traded in euro on several stock exchanges.

✅ Size. It has over €11 billion in assets.

❌ Replication. The fund is synthetically replicated. This means that instead of buying each stock in the S&P 500, it uses financial engineering to replicate its performance by doing a swap with another financial institution. This poses an additional risk compared to physical replication.

✅ Cost. At 0.05%, it's the cheapest S&P 500 ETF on the market.

✅ Broker fee. The fund is available on the Borsa Italiana, making the broker fee lower on average.

❌ Sustainability. The fund invests in all companies in the S&P 500 index, no matter how "bad" they are from an environmental, social or governance point of view.

Vanguard S&P 500 Accumulating (IE00BFMXXD54)

Just like BlackRock, Vanguard is one of the largest asset fund providers and offers many index funds at a low price.

✅ Distribution of dividends. The fund is accumulating, meaning dividends are directly reinvested and no tax needs to be paid until the sale.

✅ Domicile. The fund is domiciled in Ireland, a tax-efficient location.

✅ Currency. The fund can be traded in euro on several stock exchanges.

✅ Size. It has a bit over €5 billion in assets.

✅ Replication. The fund is physically replicated.

✅ Cost. At 0.07%, it has the same price as the iShares S&P 500 core.

✅ Broker fee. The fund is available on the Borsa Italiana, making the broker fee lower on average.

❌ Sustainability. The fund invests in all companies in the S&P 500 index, no matter how "bad" they are from an environmental, social or governance point of view.

How to buy the S&P 500 in Italy

ETFs are traded on exchanges. So to buy an ETF, you will have to turn to a broker. To make this concrete for you, we'll buy the S&P 500 ETF using the broker Fineco.

A solid option from the list above of ETFs is the iShares Core S&P 500 UCITS ETF USD (Acc) for the following reasons:

• it's cost
• size of the fund
• offered by iShares
• accumulating

Search for the S&P 500 ETF by typing its ISIN code 'IE00B5BMR087' into the search bar. You'll see further details on the ETF:

Once you are ready, click on 'Place Order'. Congratulations, you have just purchased your ETF on Fineco.

If you want to learn more about investing in the S&P 500, do read our in depth article on how to invest in S&P 500 in Italy.

The downsides of the S&P 500

The S&P 500 is a good index to invest in, but it does have some downsides:

• it's concentrated in the US stock market
• it consists of only the largest companies
• it's volatile, meaning its price fluctuates a lot

Concentrated in the US stock market

The S&P 500 represents only about 40% of the global stock market. This means that by investing in the S&P 500, you leave aside returns from many other companies around the world. For instance, countries like China or Brazil have the potential to grow significantly over the next decades.

The US stock market has performed exceptionally well during the last 50 years compared to most other countries in the world. But the past does not guarantee future returns. The American economy may continue to do well over the next 50 years, but it also may not. Betting on one single country like the US, no matter how dominant its market is at the moment, increases the likelihood of a bad outcome.

Consists of only the largest companies

The S&P 500 is made up of only the largest American companies. But good investment returns can be achieved in mid-size and smaller companies too. Just like it pays off to diversify across multiple countries, it's a good idea to spread across different company sizes as well.

Volatile

Lastly, the stock market is volatile. So a sole investment in the S&P 500 index may not match your risk profile. We’ve previously written about the role of bonds in your portfolio and you ideally want a portfolio that helps you sleep easy at night. Putting all your eggs in one basket is probably not ideal, especially if the economy of that country starts to falter.

Alternative to the S&P 500: Curvo Growth

As mentioned above, the S&P 500 index isn’t as diversified as we would like. It's possible that the next dominating country won't be the US, so an investment in the S&P 500 means you'll pass up on a great opportunity for high returns. An option for Italian investors is to invest through Curvo. In particular, the Growth portfolio is a good alternative to the S&P 500 index. It's composed of two funds, both offered by Vanguard, with the combination being similar to the FTSE All-World, the index that VWCE tracks:

• FTSE Developed All Cap Choice index (ISIN: IE00B5456744)
• FTSE Emerging All Cap Choice index (ISIN: IE00BKV0W243)

The Growth portfolio, along with the other portfolios, are managed by NNEK, a Dutch investment firm licensed by the Dutch regulator (AFM).

The Growth portfolio is more diversified than the S&P 500

The indexes in the Growth portfolio are globally diversified, and they include smaller companies too. As a consequence, Growth invests in over 7,500 companies spread across 40 countries, compared to the 500 companies in an S&P 500 ETF. This allows you to broaden your investments and not make a bet on one single country or company size.

Sustainable

Sustainable investing is challenging because everyone has different beliefs and values. The funds chosen in Growth focus on one guiding principle: they don't invest in companies that are considered destructive to the planet. This means the following sectors are excluded:

• non-renewable energy (nuclear power, fossil fuels)
• vice products (adult entertainment, alcohol, gambling, tobacco)
• weapons (civilian firearms, military weapons)
• controversial companies that do not meet the labour, human rights, environmental and anti-corruption standards defined by the United Nations Global Compact

This is in contrast to the S&P 500, which doesn’t set any sustainability standards and invests in even the "worst" companies.

All your money is invested

Your investments work with fractional shares meaning that all your money is invested. When buying your own ETFs, you're required to buy whole units of shares. This can make it much harder to do invest monthly because you may have to wait several months until you've saved enough to buy a single share. You'll also always be left with some cash on your brokerage account.

You don't encounter these issues with the Growth portfolio. You can start investing from the first month, from €50, and every cent will be invested for you. You can also set up a saving plan to send contributions monthly and put your investments on autopilot.

Summary

The S&P 500 index is still a great way to invest and has historically provided significant returns to investors. The main downside is that you’re essentially betting on the US. No matter how dominant its market is at the moment, investing in a single country increases the likelihood of a bad outcome. When investing your savings for the long term, it's a better mindset to maximise diversification when putting together your portfolio. Through the Growth portfolio available through Curvo, we’ve shown you a different way to invest to the S&P 500 but with global exposure.

Questions you may have

Where to buy S&P 500 ETFs?

ETFs are traded on exchanges. So to buy an ETF, you will have to turn to a broker. There's a variety of options for Italian investors including DEGIRO, Fineco or Directa. Discover our guide on how to invest in ETFs.

Which companies are in the S&P 500?

There are 500 companies in the S&P 500 index (hence the name!). All are American. The top 10 companies in the index are:

1. Apple
2. Microsoft
3. Amazon
4. Google
5. Berkshire Hathaway
6. Nvidia
7. Exxon Mobil
8. UnitedHealth
9. Johnson & Johnson
10. JPMorgan Chase