The Best Ways to Invest With the S&P 500 and TSX Near All-Time Highs

Learn how Canadian investors can invest with the S&P 500 and TSX near all-time highs with diversified ETFs and a long-term plan.

Key Points
  • The S&P 500 offers investors potential for impressive long-term returns, and Canadian investors can easily access this through specific ETFs.
  • BMO S&P 500 Index ETF (TSX:ZSP) provides a diversified investment option covering 500 major U.S. companies and offers nearly 20% returns over the last year with a 0.80% dividend yield.
  • iShares Core S&P/TSX Capped Composite Index ETF (TSX:XIC) complements S&P 500 investments by offering broad Canadian market exposure with a 2% dividend yield and 25% gains over the past year.

In case you haven’t noticed, the market remains near all-time highs. That comes despite persistent volatility that has plagued the market for most of this year. But with that market volatility comes an opportunity. Specifically, it creates an opportunity for investors to invest in the S&P 500.

The S&P 500 has historically provided double-digit returns for investors looking back over several decades. That’s an impressive feat that often gets hidden from view in place of high-growth individual picks.

For Canadian investors, the chance to invest in the S&P 500 can be a lucrative prospect. All investors need to do is pick the right investments to gain exposure to the S&P 500.

While there are more than a few options for Canadian investors to get that exposure, there are two exchange-traded funds (ETFs) in particular to note.

a person watches stock market trades

Source: Getty Images

ZSP: The simple way to access the S&P 500

The first option for investors looking to invest in the S&P 500 is through BMO S&P 500 Index ETF (TSX: ZSP). This fund gives Canadian investors access to 500 of the largest companies in the U.S. market.

That’s everything from market leaders in utilities, telecom, financials, consumer goods, and other sectors. And that includes high-growth tech stocks and established dividend knights, too.

The main advantage for investors looking to invest in the S&P 500 is that diversification. Additionally, the fund can serve as a passive investment that grows over time. In fact, over the trailing 12-month period, the fund has returned nearly 20%.

Prospective investors can also take solace in knowing that investing in ZSP doesn’t require picking individual winners. In other words, returns are driven by the collective performance of the companies in the index.

And while growth is the primary aim of the fund, ZSP does offer a quarterly distribution to investors, which yields 0.80%.

XIC: Broad TSX exposure for stability

Another option for investors looking to complement the decision to invest in the S&P 500 is to consider a broad-market ETF. One great example of this is iShares Core S&P/TSX Capped Composite Index ETF (TSX: XIC).

This ETF provides investors with a broad cross-section of the Canadian market. That includes the more popular sectors that investors often seek out, such as industrials, financials, and energy.

This makes XIC an anchor investment for investors seeking Canadian exposure alongside U.S. growth.

Like ZSP, the appeal is that broad diversification. There’s no need to pick the perfect energy stock or the best big bank stock. The fund covers the largest names on the market and makes that selection easier.

In addition to its broad exposure to the Canadian market, XIC offers a quarterly dividend that, as of the time of writing, carries a yield of 2%. This makes the fund appealing for long-term investors such as those looking to invest in the S&P 500.

Over the trailing 12-month period, the fund has returned an impressive 25% gain.

Final thoughts on how investors can invest in the S&P 500

No investment is without risk. That’s part of the reason why ETFs such as ZSP and XIC can help to reduce the risks that come with investing in individual stocks.

In my opinion, one or both of the ETFs mentioned above should be core building blocks in a larger, diversified portfolio.

Investors concerned about buying near market highs can build positions through regular contributions instead of waiting for the perfect pullback.

Buy them, hold them, and watch your portfolio grow.

Fool contributor Demetris Afxentiou has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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