Search

How to Invest in the S&P 500 from New Zealand

With the S&P 500 one of the most popular investment choices for New Zealanders outside of KiwiSaver, our guide explains the options available. We look at NZ-registered funds and ETFs, ASX-listed and US-listed ETFs, and outline must-know facts and frequently asked questions around hedging and diversification.
Updated 22 July 2024

Summary
  • The S&P 500 index represents 500 of the largest US-listed companies, with notable members like Microsoft, Amazon, Alphabet, Tesla and Berkshire Hathaway, among lesser-known names.
  • The S&P 500 is increasingly popular for investors looking to grow their portfolios. October 2023 trading data from Sharesight indicated that the Smartshares S&P 500 ETF (USF) was the most popular investment purchased by New Zealanders on the NZX, and we see this interest continuing.
  • Thanks to several investment platforms, funds and ETFs, New Zealanders can invest in the S&P 500. The platforms compete vigorously with each other, helping drive down the trading fees to record lows.

​To help you decide how to invest in the S&P 500, we outline and explain:
Know This First: Understanding the Risks of Investing in the S&P 500 (Specific for New Zealanders)
While investing in the S&P 500 can be rewarding, it's crucial to recognise that it's not without risks. As with any investment, there are several factors to consider before taking a position in the S&P 500 index (and investing in US shares in general).

1) Market Volatility:
The S&P 500 Doesn't Always Go Up: It's important to understand that the S&P 500, like any sharemarket index, experiences ups and downs. While it has historically trended upwards over the long term, short-term fluctuations can be significant, whereby the index stays low for some time. Additionally: 
  • Economic downturns, geopolitical events, and market corrections can all lead to declines in the index. For example, during the financial crisis of 2008-2009, the S&P 500 nearly halved, similar to after the dotcom crash of the early 2000s.
  • For this reason, it's essential to have a long-term perspective when investing in the S&P 500 and to be financially and emotionally prepared for market downturns.

2) Foreign Exchange Risks:
Your investment is subject to foreign exchange risk when investing in the S&P 500 from New Zealand if it's unhedged. The value of your investment in NZD terms can fluctuate not only based on the performance of the S&P 500 but also on the NZD/USD exchange rate, as outlined below:
  • Effects of a Stronger NZD: If the NZD strengthens against the USD, the value of your US investment decreases when converted back to NZD. This can erode any gains made from the performance of the companies in the index.
  • Hedging Options: Some investment platforms and funds offer hedged investment options, which can protect against currency fluctuations. However, these often come with additional costs and may not fully offset FX risks.​

MoneyHub Founder Christopher Walsh shares his comments on investing in the S&P500:

"There are three important considerations to make upfront:
  1. The S&P 500 is a Bet on the US Economy: Investing in the S&P 500 is often seen as a way to gain exposure to the US economy's performance. The index includes 500 of the largest US-listed companies, making it a broad indicator of the overall economic health of the United States - investors who are confident that the economy will continue to grow invested in the S&P500. However, if you're unsure or don't know, I suggest reading more to be fully informed before deciding. 
  2. Hedged vs Non-Hedged Investments Make a Difference: New Zealanders investing in the S&P 500 face currency risk due to NZD/USD exchange rate fluctuations. A hedged investment aims to protect against these fluctuations, potentially offering more stable returns in NZD terms. However, hedging comes with additional costs and might limit the benefits of favourable currency movements. Non-hedged investments are more directly exposed to exchange rate changes, which can positively or negatively affect returns when converted back to NZD. What you decide comes down to what risk you want to take. 
  3. ASX S&P 500 ETFs and FIF Rules Matter: Australian-listed S&P 500 ETFs are popular but are rarely exempt from New Zealand's Foreign Investment Fund (FIF) tax rules, meaning you'll have ongoing costs and hassle. For this reason, NZ-based S&P500 investments tend to be easier to manage and account for.

What S&P500 investment(s) you make will come down to your preferences; we've published this guide to explain all the options to help you make an informed decision". ​
Christopher Walsh
MoneyHub Founder

InvestNow's Foundation Series is our Favourite Fund Innovation in our 2024 Editor's Choice Awards:

  • Vanguard funds, which invest in the S&P 500, are widely known overseas but, until recently, not that cheap to invest in from New Zealand.
  • However, the arrival of the InvestNow Foundation Series has changed that, with two popular funds being available for record-low fees (0.03% for the ​Foundation Series US 500 Fund and 0.07% for the ​Foundation Series Total World Fund). Both these funds are available as hedged (to NZD) and unhedged.

MoneyHub's editor Christopher Walsh says:
"InvestNow offers S&P 500 Vanguard funds with fees that align with the underlying Vanguard ETFs; investors can take advantage of Vanguard’s super low annual fees. Furthermore, because they're Portfolio Investment Entity (PIE) funds, investors earning at higher tax rates can benefit from tax efficiencies compared to directly investing in the same Vanguard ETFs.

For anyone looking to invest in the S&P 500, the fee structure of the two Foundation Series Funds is highly beneficial for those investors with a multi-year investment horizon, as the benefits of the super-low annual management fees, competitive one-off transaction fees alongside the tax advantages of the PIE structure means that the after-fees-and-tax returns (or the returns that you as an investor get to keep) will be some of the highest out of all Vanguard investment options available to New Zealanders".

S&P 500 ETFs Available in New Zealand (NZX-Listed ETFs and Managed Funds)

There are five New Zealand-based funds that invest in the S&P 500 via the Vanguard S&P 500 ETF (VOO). Each option has different fees, tax structures and some are hedged, while others are not. 
What option is the cheapest?
Our extensive research into the InvestNow Foundation Series highlights the low fee, and why for many it can be the the cheapest option for those who hold their investment for the long-term. However, every investor is different - we suggest reading this guide in detail, alongside this trusted MoneyKingNZ resource which outlines the best S&P 500 options for a range of different investor profiles. The research also looks at tax costs, fund fees and must-know considerations.

Should my S&P 500 investment be hedged?
  • All the funds track the same index and hold identical companies, leading to a similar performance in underlying investments, but differences in fund returns are due to currency fluctuations (NZD vs. USD). Currency-hedged funds aim to deliver similar returns to the S&P 500 index in USD terms, removing exchange rate volatility, but you'll pay more fees to invest in those and may miss out on favourable NZD:USD movements.
  • However, the choice between currency-hedged and unhedged funds depends on individual preference and outlook on currency movements. Long-term investors might prefer unhedged funds to ride out exchange rate volatility. Hedged funds offer simplicity in understanding returns, closely mirroring the USD returns of the S&P 500 index.

S&P 500 ETFs on the Australian Securities Exchange (ASX)

Standard trackers (hedged and unhedged):

1. iShares S&P 500 ETF AUD (IVV) - Managed by iShares
  • Overview: This ETF provides exposure to the S&P 500 by including all 500 companies, mirroring the index's composition.
  • Strategy: Standard S&P 500 index tracking.

2. iShares S&P 500 (AUD Hedged) ETF (IHVV) - Managed by iShares
  • Overview: Similar to IVV but with currency hedging to mitigate the effects of fluctuations in the AUD/USD exchange rate.
  • Strategy: S&P 500 index tracking with currency hedging.

3. BetaShares S&P 500 Equal Weight ETF (QUS) - Managed by BetaShares
  • Overview: Unlike traditional S&P 500 funds, this ETF assigns an equal weight to each company in the index, reducing concentration in the largest stocks.
  • Strategy: Equal-weighted approach to the S&P 500.

4. SPDR S&P 500 ETF Trust AUD (SPY) - Managed by SPDR (State Street Global Advisors)
  • Overview: A version of the well-known US-listed SPY ETF traded in Australian dollars, tracking the S&P 500.
  • Strategy: Standard S&P 500 index tracking.

Higher-risk S&P 500 ETFs:
These ETFs offer unique ways to invest in the S&P 500, focusing on income generation through dividends and options strategies. They cater to investors who prioritise regular income over potential capital gains and are comfortable with the specific risks associated with options trading and high-dividend strategies.

1. BetaShares S&P 500 Yield Maximiser (UMAX) - Managed by BetaShares

Overview and Strategy:
  • High Dividend Yield with Options Strategy: UMAX aims to provide investors with higher income through dividends from S&P 500 companies. To enhance the yield, it employs an 'options overlay strategy'.
  • Options Overlay Strategy Explained: This strategy involves writing (or selling) call options on the S&P 500 index or its constituents. A call option gives the buyer the right, but not the obligation, to buy a stock at a predetermined price within a certain timeframe. By selling these options, UMAX earns option premiums, which the buyers of these options pay.
  • Risk and Reward Balance: While this strategy can provide additional income (from option premiums) on top of dividends, it may cap the potential capital appreciation. If the index or stocks rise significantly, the ETF might have to sell them at the strike price of the call options, potentially missing out on some upward gains.

2. Global X S&P 500 High Yield Low Volatility ETF (ZYUS) - Managed by Global X

Overview and Strategy:
  • High Yield and Low Volatility Focus: ZYUS is designed for investors seeking income and stability. It targets S&P 500 companies that consistently pay high dividends and exhibit lower price volatility.
  • Selection Criteria: The fund selects stocks with a history of paying higher dividends than the average S&P 500 company. Additionally, it filters for stocks that have shown less price fluctuation, indicating lower volatility.
  • Balanced Approach: This ETF aims to provide a steady income stream through dividends while trying to reduce the risk associated with market fluctuations. It's suitable for investors who are income-focused but also want to mitigate the risks of high volatility.

3. Global X S&P 500 Covered Call ETF (AUD) (UYLD) - Managed by Global X

Overview and Strategy:
  • Covered Call Strategy for Income: UYLD uses a covered call strategy to generate income from option premiums. This strategy involves holding a stock (in this case, stocks from the S&P 500) and simultaneously selling a call option on that stock.
  • How Covered Calls Work: By selling a call option, the fund receives an option premium. However, it also agrees to sell the stock at the option's strike price if the stock's price goes above that level before the option expires.
  • Income and Risk Considerations: This approach aims to provide regular income from option premiums. The trade-off is that if the S&P 500 significantly appreciates, the fund's gains are capped at the strike price of the call options. It's ideal for investors seeking income in relatively stable or moderately rising markets.​
Considering the ASX to invest in the S&P 500? Make sure you understand the risks:
  • The ASX-listed S&P 500 ETFs offer diverse strategies, from traditional index tracking to equal-weighting and income-focused strategies.
  • Some ETFs, like IHVV, are hedged against currency fluctuations, which is crucial for investors concerned about exchange rate risks between the AUD and USD. However, if you're investing with NZD, there is no hedge between the NZD and AUD, given it's an ASX-listed ETF traded in AUD. 
  • Certain ETFs, like UMAX and UYLD, emphasise income generation, which may appeal to investors prioritising dividends over capital gains.
  • Overall, if you're considering investing in the S&P 500 via the ASX, it's critical to consider not only the investment strategy (weighted vs equal apportionment) but also the impact of currency exchange and the different risk profiles associated with each fund. You'll also need to see if the ETF is exempted from the IRD's FIF rules.

Do you want to invest in an ASX-listed S&P 500 ETF? There are several ASX-trading investment platforms:

40+ S&P 500 ETFs on US Stock Exchanges (NYSE, NASDAQ and CBOE)

Popular S&P 500 Trackers

The SPDR S&P 500 ETF Trust (SPY), iShares Core S&P 500 ETF (IVV), and Vanguard S&P 500 ETF (VOO) are among the most commonly traded and well-known ETFs for the S&P 500:
  1. SPDR S&P 500 ETF Trust (SPY) - Managed by SPDR (State Street Global Advisors: This is one of the oldest and largest ETFs in the world and is highly popular due to its liquidity and long track record. Both institutional and retail investors often use SPY for exposure to the S&P 500.
  2. iShares Core S&P 500 ETF (IVV) - Managed by iShares: This ETF is known for its low expense ratio and is managed by BlackRock's iShares, which is one of the largest providers of ETFs globally. IVV offers comprehensive exposure to the S&P 500 and is favoured for its cost efficiency.
  3. Vanguard S&P 500 ETF (VOO) - Managed by Vanguard: Managed by Vanguard, known for its low-cost investment products, VOO is also a popular choice for investors looking to gain exposure to the S&P 500. Its low expense ratio makes it an attractive option for long-term investors.​

Each of these specialised ETFs provides a unique way to invest in the S&P 500 according to every investor's specific goals, risk appetites, and values. While the 'big three' will always be popular, it's important to appreciate the choices available beyond the conventional trackers and that the S&P 500 can be accessed in numerous ways, each with its nuances and potential advantages.

Beyond the Core S&P 500 ETFs

While the above three ETFs are foundational choices for many investors seeking exposure to the S&P 500, S&P 500 ETFs extend far beyond these popular options. With over 40 S&P 500 ETFs listed on US exchanges like the NYSE and NASDAQ, there is diversity in investment strategies and themes. These specialised ETFs venture into various niches, offering tailored approaches to investing in the S&P 500:
  1. Innovative Investment Strategies: Some ETFs adopt unique methodologies such as Growth at a Reasonable Price (GARP), focusing on quality, growth, or combining value with momentum strategies.
  2. Dividend and Income Focus: For investors prioritising regular income, several ETFs emphasise high-dividend-yielding stocks, blending income generation with stability.
  3. Tailored Risk Management: Certain ETFs are designed to manage specific investment risks, including tail risks, or employ sophisticated strategies like covered calls for income.
  4. Sector-Specific and Equal Weighting: Others break away from the typical market capitalisation weighting, offering equal weight across all S&P 500 companies or focusing on specific sectors for targeted exposure.
  5. Leveraged and Inverse Options: For those seeking more aggressive strategies, leveraged and inverse ETFs provide amplified exposure or the ability to profit from declines in the S&P 500.
  6. Niche Themes and Ethical Considerations: Catering to specific ethical guidelines or themes, some ETFs focus on ESG criteria, religious values or exclude companies involved in fossil fuels.
  7. Bond and Volatility ETFs: Beyond the array of equity-focused S&P 500 ETFs, there are specialised ETFs that delve into the realms of fixed income and market volatility. These ETFs present unique opportunities for investors looking to diversify their exposure within the S&P 500 universe or to hedge against market fluctuations.

We explain what you need to know about these niches and themes below:

1. Innovative Investment Strategy S&P 500 ETFs:

These ETFs go beyond basic index tracking, focusing on specific investment themes within the S&P 500:
  • Growth at a Reasonable Price (GARP): Balancing growth and value, targeting companies with potential for growth at reasonable valuations.
  • Quality-Focused: Concentrating on companies with strong fundamentals.
  • Growth-Oriented: Targeting companies with higher growth prospects.
  • Value-Oriented: Focusing on undervalued companies within the index.
  • Environmental, Social, and Governance (ESG): Investing in companies adhering to specific ESG criteria.​

ETFs include:
  1. Invesco S&P 500 GARP ETF (SPGP) - Managed by Invesco: Focuses on growth at a reasonable price (GARP) strategy within the S&P 500.
  2. Invesco S&P 500 Quality ETF (SPHQ) - Managed by Invesco: Targets high-quality companies in the S&P 500 based on fundamental metrics.
  3. SPDR Portfolio S&P 500 Growth ETF (SPYG) - Managed by SPDR: Concentrates on the growth-oriented companies within the S&P 500.
  4. Vanguard S&P 500 Value Index Fund ETF (VOOV) - Managed by Vanguard: Focuses on value-oriented companies within the S&P 500.
  5. Invesco S&P 500 Top 50 ETF (XLG) - Managed by Invesco: Concentrates on the top 50 largest companies in the S&P 500.
  6. ​SPDR Portfolio S&P 500 Value ETF (SPYV) - Managed by SPDR: Targets value stocks within the S&P 500.
  7. Invesco S&P 500 Value with Momentum ETF (SPVM) - Managed by Invesco: Combines value and momentum strategies within the S&P 500.
  8. Xtrackers S&P 500 ESG ETF (SNPE) - Managed by Xtrackers: Focuses on companies within the S&P 500 that adhere to environmental, social, and governance (ESG) criteria.

2. Dividend and Income-Focused S&P 500 ETFs:

Ideal for income-seeking investors, these ETFs focus on high-dividend-yielding companies which specific strategies:
  • Dividend Aristocrats: Companies with a history of consistently increasing dividends.
  • High Dividend Yield: Targeting the highest dividend-yielding companies.
  • Low Volatility High Dividend: Combining income with stability.

ETFs include:
  1. ProShares S&P 500 Dividend Aristocrats ETF (NOBL) - Managed by ProShares: Invests in S&P 500 companies with a history of increasing dividends.
  2. AAM S&P 500 High Dividend Value ETF (SPDV) - Managed by AAM: Focuses on high-dividend-paying companies in the S&P 500.
  3. Invesco S&P 500 High Div Low Volatility ETF (SPHD) - Managed by Invesco: Targets high dividend and low volatility stocks within the S&P 500.
  4. SPDR Portfolio S&P 500 High Dividend ETF (SPYD) - Managed by SPDR: Focuses on high-dividend-paying companies within the S&P 500.
  5. SP Funds S&P 500 Sharia Industry Exclusions ETF (SPUS) - Managed by SP Funds: Excludes companies that do not comply with Sharia principles from the S&P 500.

3. Tailored Risk Management S&P 500 ETFs:

These ETFs employ strategies to manage specific investment risks, including Tail Risk Protection (which aims to mitigate extreme risks in the market) and Covered Call/Buy-Write Strategies whereby the investment managers generate income through options strategies:
  1. Global X S&P 500 Tail Risk ETF (XTR) - Managed by Global X: Aims to mitigate tail risks within the S&P 500.
  2. Nuveen S&P 500 BuyWrite Income Fund (BXMX) - Managed by Nuveen: Implements a buy-write (covered call) strategy on the S&P 500 for potential income generation.
  3. Nuveen S&P 500 Dynamic Overwrite Fund (SPXX) - Managed by Nuveen: Uses an options overwrite strategy, dynamically applied to the S&P 500, for potential income.​

4. Sector-Specific and Equal Weighting S&P 500 ETFs:

These ETFs offer a different approach to index representation - Equal Weight Exposure (reducing concentration by equally weighting all companies) and Sector-Specific (focusing on specific sectors within the S&P 500 for targeted exposure):
  • Invesco S&P 500 Equal Weight ETF (RSP) - Managed by Invesco: Provides equal weight exposure to all S&P 500 companies, reducing concentration risk.​

5. Leveraged and Inverse S&P 500 ETFs:

These ETFs offer more aggressive investment strategies, eitrher borrowing to invest (and amplifying the index's positive returns) or gaining from negative movements in the index:
  1. Direxion Daily S&P 500 Bull 3X Shares (SPXL) - Managed by Direxion: Offers 3X leveraged exposure to the S&P 500, suitable for short-term, bullish strategies.
  2. Direxion Daily S&P 500 Bear 3X Shares (SPXS) - Managed by Direxion: Provides 3X inverse exposure to the S&P 500, suitable for short-term, bearish strategies.
  3. Direxion Daily S&P 500 Bear 1X Shares (SPDN) - Managed by Direxion: A non-leveraged inverse ETF targeting the negative performance of the S&P 500.​

6. Niche Themes and Ethical Considerations S&P 500 ETFs:

These ETFs cater to specific themes and ethical guidelines, including Covered Call Strategies (for income generation through options), Fossil Fuel-Free Exclusions and Religious or Ethical guidelines:
  1. Global X S&P 500 Tail Risk ETF (XTR) - Managed by Global X: Aims to protect against tail risks within the S&P 500.
  2. Global X S&P 500 Covered Call ETF (XYLD) - Managed by Global X: Implements a covered call strategy on the S&P 500 for potential income generation.
  3. SPDR S&P 500 ESG ETF (EFIV) - Managed by SPDR: Focuses on companies within the S&P 500 that meet specific environmental, social, and governance criteria.
  4. Global X S&P 500 Catholic Values ETF (CATH) - Managed by Global X: Aligns with the U.S. Conference of Catholic Bishops' investment guidelines.
  5. SPDR S&P 500 Fossil Fuel Reserves Free ETF (SPYX) - Managed by SPDR: Excludes companies with fossil fuel reserves from the S&P 500.
  6. Invesco S&P 500 Pure Value ETF (RPV) - Managed by Invesco: Concentrates on pure value stocks within the S&P 500.
  7. Invesco S&P 500 Low Volatility ETF (SPLV) - Managed by Invesco: Focuses on the least volatile stocks in the S&P 500.
  8. Invesco S&P 500 Pure Growth ETF (RPG) - Managed by Invesco: Targets pure growth stocks within the S&P 500.
  9. Invesco S&P 500 High Beta ETF (SPHB) - Managed by Invesco: Aims at the highest beta stocks in the S&P 500, offering higher risk and potential return.
  10. iShares S&P 500 Value ETF (IVE) - Managed by iShares: Invests in undervalued companies within the S&P 500.
  11. Invesco S&P 500 Momentum ETF (SPMO) - Managed by Invesco: Focuses on S&P 500 companies demonstrating upward price momentum.
  12. iShares S&P 500 Growth ETF (IVW) - Managed by iShares: Concentrates on the growth stocks within the S&P 500.
  13. ​Vanguard S&P 500 Growth Index Fund;ETF (VOOG) - Managed by Vanguard: Focuses on growth-oriented companies within the S&P 500.
  14. Invesco S&P 500 Pure Value ETF (RPV) - Managed by Invesco: Concentrates purely on value stocks within the S&P 500.
  15. ​Invesco S&P 500 Low Volatility ETF (SPLV) - Managed by Invesco: Focuses on the least volatile stocks within the S&P 500.

7. Bond and Volatility ETFs:

These ETFs focus on the fixed income side and market volatility using Bond Exposure (investing in corporate bonds from S&P 500 companies) or Volatility Tracking (focusing on the market's volatility expectations):
  1. ProShares S&P 500 Bond ETF (SPXB) - Managed by ProShares: Offers exposure to corporate bonds of S&P 500 companies.
  2. iPath Exchange Traded Notes S&P 500 VIX ST Ftrs B (VXX) - Managed by iPath: Tracks short-term volatility expectations in the S&P 500 market.

Do you want to invest in a US-listed S&P 500 ETF? There are several US-trading investment platforms:

Must-Know Facts about Investing in the S&P 500

Once you've decided to invest in the S&P 500, it's important to know how the ETFs, funds and platforms compare and what to consider before going further. To have the maximum return, you'll need to minimise investor costs, so being aware of the key differences will help you find an investment that's right for you.

The US Economy Drives the S&P 500

The S&P 500 reflects the US economy's health and is heavily influenced by domestic economic policies, consumer trends, and market sentiments in the United States. However, global events, trade policies, and international relations, especially involving the US, can also significantly affect the S&P 500.

​The S&P 500 is also sensitive to changes in US interest rates and inflation. An environment of rising rates or high inflation can impact different sectors within the index differently.

Historical Performance Don't Reflect the Future

While the S&P 500 has historically provided strong returns, past performance is not a reliable indicator of future results. The returns of the past look great, but you can't extrapolate past growth into the future without considering current market dynamics and economic forecasts. No one knows what will happen, and a 10% return one year doesn't mean you'll get a 10% the next.

The Sector Diversification Within the S&P 500 Changes Over Time

​The index's composition changes over time, with certain sectors becoming more dominant (like technology in recent years). 
Recently, the S&P 500 has become increasingly concentrated in top technology companies. This concentration can lead to higher volatility and risk, emphasizing the need for diversification even within an S&P 500 investment.

Understanding Dividends and Growth to Maximise Returns

While some S&P 500 companies are known for paying regular dividends, others are growth-oriented, reinvesting profits to fuel expansion.​

The Exchange Rate Double-Edged Sword Affects Returns

​For NZ investors, not only do the fortunes of the S&P 500 matter, but so does the NZD/USD exchange rate. A strengthening NZD can reduce returns when converting back to NZD, while a weakening NZD can enhance them.

​Investing in the S&P 500 is typically considered a long-term strategy. Short-term market fluctuations are normal, but the S&P 500 has historically shown resilience and growth over extended periods.
Further reading: MoneyKingNZ has a useful resource which outlines the best S&P 500 options for a range of different investor profiles which looks at tax costs, fund fees and must-know considerations.

Investing in the S&P 500 – Frequently Asked Questions

Investing in the S&P 500 can either be straightforward (e.g. with Kernel, Smartshares or the Foundation Series), or an investment where you need to consider foreign exchange rates, tax, investment management and more. Our FAQs below explain what you need to know.

What happens to my investment if the NZD:USD exchange rate moves?

If you're in a hedged S&P 500 fund or ETF, there is no foreign exchange gain or loss. However, US or ASX-listed S&P 500 ETFs don't hedge against movements between the NZD and USD. This means there’s no arrangement to mitigate any move in the exchange rate. So, if the NZD goes up against the USD, and all other things being equal, the NZD value of your S&P 500 investment will be less due to the USD being worth less. But you won’t incur that loss in real terms unless you sell the investment and convert the USD back into NZD.

If you would prefer an S&P 500 investment that is hedged to the NZD, you'll pay a hedging fee on top of the fund or ETF's management fee, which is usually around 0.30% to 0.50%.

What do I need to do about tax and the IRD in general?

​When you invest in the US with ETFs or shares, there are two tax obligations – US Federal and New Zealand taxes. Both the Stake, Sharesies and Hatch platforms take care of all US tax obligations at source (a small fee applies). This means your returns are net of US tax (around 15% for most investors’ dividends and distributions) and you don’t need to do any paperwork as it’s done on your behalf by your platform’s partners.
​
For New Zealanders who don’t hold over NZ$50,000 in USD investments, the IRD doesn’t require anything more than state your overseas income. This guide from Hatch explains the process in detail.

How do I choose between NZ and US/ASX-listed S&P 500 ETFs?

Consider factors like currency risk, investment flexibility, and access to platforms. NZ-listed ETFs offer direct exposure in NZD (with the option of hedging), while US/ASX-listed ETFs may provide more variety but involve currency exchange considerations.

Can I invest in a US-based ETFs and managed funds from New Zealand?

Yes – Stake, Tiger Brokers, Superhero, Sharesies and Hatch all offer a number of ETFs on their platforms, and many New Zealand fund managers offer investments which invest in US-based companies.

How do currency fluctuations affect my investment?

US/ASX-listed ETF investments are subject to NZD/USD or NZD/AUD exchange rate fluctuations. Currency hedging can mitigate this, but it comes with additional costs.

Should I opt for currency hedging or let my returns be influenced by the performance of the NZD?

This depends on your view of future currency movements and risk tolerance. Hedging can protect against currency volatility but may also limit gains from favourable exchange rate movements.

Are there ethical or ESG Options for S&P 500 investments?

Yes, several ETFs focus on ESG criteria or specific ethical guidelines, like the SPDR S&P 500 ESG ETF (EFIV) and Global X S&P 500 Catholic Values ETF (CATH).

What are the key differences between 'Equal Weight' and 'Standard' S&P 500 ETFs?

Equal-weight ETFs like Invesco's RSP provide uniform exposure across all S&P 500 companies, reducing concentration risk, while standard ETFs are market-cap-weighted.

Can I invest my KiwiSaver funds into the S&P 500?

Yes, certain KiwiSaver funds offer exposure to the S&P 500, like the SuperLife US 500 fund and Kernel KiwiSaver S&P 500 fund.

How much of my portfolio should I invest in the S&P 500?

MoneyHub isn't a financial adviser, so we can't suggest any appropriate investment. However, diversification is the key to managing risk. Keeping your savings in cash, term investments, a portfolio of shares and a handful of managed funds is a proven way to minimise your exposure to any one investment.

InvestNow's Foundation Series is our Favourite Fund Innovation in our 2024 Editor's Choice Awards:

  • Vanguard funds, which invest in the S&P 500, are widely known overseas but, until recently, not that cheap to invest in from New Zealand.
  • However, the arrival of the InvestNow Foundation Series has changed that, with two popular funds being available for record-low fees (0.03% for the ​Foundation Series US 500 Fund and 0.07% for the ​Foundation Series Total World Fund). Both these funds are available as hedged (to NZD) and unhedged.

MoneyHub's editor Christopher Walsh says:
"InvestNow offers S&P 500 Vanguard funds with fees that align with the underlying Vanguard ETFs; investors can take advantage of Vanguard’s super low annual fees. Furthermore, because they're Portfolio Investment Entity (PIE) funds, investors earning at higher tax rates can benefit from tax efficiencies compared to directly investing in the same Vanguard ETFs.

For anyone looking to invest in the S&P 500, the fee structure of the two Foundation Series Funds is highly beneficial for those investors with a multi-year investment horizon, as the benefits of the super-low annual management fees, competitive one-off transaction fees alongside the tax advantages of the PIE structure means that the after-fees-and-tax returns (or the returns that you as an investor get to keep) will be some of the highest out of all Vanguard investment options available to New Zealanders".
​Related guides
​Further reading: MoneyKingNZ has a useful resource which outlines the best S&P 500 options for a range of different investor profiles which looks at tax costs, fund fees and must-know considerations.