Whether you’re just starting or have been investing for a while, you may want to consider an ETF (exchange-traded fund) as part of your portfolio. The S&P 500 represents the top 500 companies in the United States, and its performance is used as a barometer for the health of these businesses and the economy as a whole.
The S&P 500 is also home to some of the most exciting investment opportunities around. For UK investors looking for a slice of US stocks, it makes sense to invest in an exchange-traded fund (ETF) that tracks this index. In this guide, we’ll look at the best S&P 500 ETFs available for UK stockbrokers.
Best S&P 500 ETF UK: Our Top 5 Picks
1. Vanguard S&P 500 ETF
Launched in 2001, Vanguard S&P 500 ETF (VOO) offers broad exposure to large-cap U.S stocks through its investment in all 500 constituents of the S&P 500 index. Its average return since inception is 10%, slightly lower than that of SPY due to its higher tracking error, which occurs when an ETF deviates from its underlying index. This fund is one of the largest on the market, with a relatively low expense ratio (0.07%).
Vanguard offers this fund to residents of the UK, which tracks the S&P500 as closely as possible. It’s available on the London Stock Exchange and can be bought through most online brokers for a low fee.
2. iShares Core S&P Small-Cap ETF
The iShares Core S&P Small-Cap ETF follows the performance of small-cap companies in the United States with high growth potential. It tracks Standard & Poor’s 600 Small Cap Index, which will give you exposure to about 600 U.S. companies with a market capitalization of $2 billion or less.
The ETF is ideal for investors who want exposure to small-cap stocks, but don’t have the time or inclination to pick small-cap stocks themselves. This Best S&P 500 ETF UK fund has an expense ratio of just 0.04%, making it one of the cheapest small-cap funds available, and it has a decent dividend yield of 1.9%.
3. SPDR S&P 500 UNITS ETF
SPDR S&P 500 ETF (SPY) is the oldest and most liquid ETF in the world. The SPDR S&P 500 ETF has a management expense ratio (MER) of 0.09% and a minimum investment of $60. It also pays a dividend yield of 1.8%. The top 10 holdings of The fund focus on technology and communication services. This fund holds the same stocks as its competitors but has a slightly higher expense ratio. It does have a slight edge over the others in terms of liquidity.
4. ProShares Short VIX Short-Term Futures ETF
The ProShares Short VIX Short-Term Futures ETF is aimed at investors who want to benefit from a decline in the volatility index. It works with contracts with a weighted average maturity between one and three months. The fund is a passive, index-replicating ETF, so it doesn’t try to beat the underlying index’s performance.
It has an expense ratio of 0.95%, which is higher than average for similar ETFs. This factor with its inverse exposure makes it expensive compared to simply buying VIX futures directly. The fund has performed very well since its inception, but it can be very volatile. Investors should not consider this fund for long-term investments due to its volatility and tendency to lose value over time.
5. iShares Core S&P Mid-Cap ETF
The iShares Core S&P Mid-Cap ETF is well diversified across holdings, sectors, and industries. With a low expense ratio, it is a cost-effective choice for broad exposure to U.S. midcap stocks. It has a diversified portfolio of mid-sized U.S. companies, including select growth and value names.
The fund invests at least 80% of its assets in securities that are included in the index and in depositary receipts that represent securities in the index. It may invest up to 20% of its assets in certain futures, options and swap contracts, cash, and cash equivalents, as well as in securities not included in the index but which BFA believes will help the fund track the index.
The biggest downside is that it charges a high fee for small investors, which can make it difficult to build a diversified portfolio without an IRA account or other tax-advantaged investment vehicle.
Conclusion
The S&P 500 is a great way to get exposure to the US stock market without having to buy all of its constituent shares. We’ve looked at five of the most popular and reviewed ETFs, to help you find the best S&P 500 ETF. As always, if you have any questions or comments about these funds, please leave them in the box below.
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