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.

More on Stocks for Beginners

Metals
Energy Stocks

What Happens Next After Ottawa’s Deadline for Stelco

Stelco's owner has defended its layoffs, but Ottawa's deadline doesn't automatically settle the jobs dispute or the investment case.

Read more »

Safety helmets and gloves hang from a rack on a mining site.
Stocks for Beginners

Canada Lost 68,000 Jobs in September: The October 28 Rate Call Just Got Harder

September's job losses complicate the rate decision, while Scotiabank shows why borrowers' relief and bank earnings aren't the same thing.

Read more »

Canadian energy stocks are rising with oil prices
Energy Stocks

Diesel Is Running Short Worldwide: The Canadian Refiner Cashing In

Suncor's refining margins show how tight fuel supplies can support cash, while a modest dividend yield keeps expectations realistic.

Read more »

man looks surprised at investment growth
Stocks for Beginners

Maxed Out Your TFSA? The Account Where Canadian Dividends Are Taxed Less

A taxable account gives eligible Canadian dividends a tax credit, but the gross-up can affect retirement benefits.

Read more »

dreaming of financial success
Dividend Stocks

3 Questions to Ask Before Buying a Dividend Stock

Buying a dividend stock? Here are three questions to help you look beyond the yield, with examples from Enbridge, Fortis…

Read more »

Hourglass and stock price chart
Stocks for Beginners

Aritzia Jumped 20% in a Day: What It Says About the Canadian Consumer

Aritzia's rally reflects strong demand and U.S. expansion, while tariff refunds and a higher share price deserve separate attention.

Read more »

Real estate investment concept with person pointing on growth graph and coin stacking to get profit from property
Dividend Stocks

Buying Your First Home? The $8,000 FHSA Deduction Most Renters Miss

An eligible renter's $8,000 FHSA contribution can save $2,400 at a 30% tax rate, with the purchase date guiding investments.

Read more »

industrial worker on construction site laying sealant for waterproofing cement
Dividend Stocks

Is Your Side Hustle a Business or a Hobby? The CRA Cares

Understand if your side hustle is a business or hobby. If your goal is to earn side income, you should…

Read more »