Stocks and ETFs
What shares and ETFs are, what an index like the S&P 500 actually holds, and the main types of index explained simply.
You don't need to pick individual companies to invest. Many beginners start with funds that hold hundreds or thousands of companies at once. This page explains what you'd actually own.
Shares: owning a small piece of a company
A share is a tiny part of a company. If the company grows its profits, its shares tend to become worth more, and many companies pay part of their profits to shareholders as dividends. If the company struggles, its shares can fall, and if it fails you can lose everything you put into it. That's why putting all your money into one company is risky.
Funds and ETFs: lots of shares in one go
A fund pools money from many people and buys lots of shares or bonds at once, so one bad company does less damage. An ETF (exchange-traded fund) is a type of fund that's bought and sold on a stock exchange during the day, like a share. A traditional fund is usually bought and sold once a day at a set price. Inside, they can work in exactly the same way.
Most ETFs are index funds: rather than paying a manager to pick winners, they simply follow an index, which is a list of companies chosen by a set of rules. That keeps costs low. Read more in Index funds explained.
The S&P 500 explained
The S&P 500 is an index of about 500 of the largest companies listed in the US. S&P Dow Jones Indices, the company that runs it, says it covers around 80% of the value of the US stock market. It's often used as shorthand for how US shares are doing.
It's weighted by size, so bigger companies make up a bigger share of it. Today, a handful of very large technology companies make up a big part of the index. If those companies have a bad patch, the whole index feels it.
The 10 largest companies in the S&P 500
| # | Company | Share of index |
|---|---|---|
| 1 | NVIDIA | 8.3% |
| 2 | Apple | 7.4% |
| 3 | Microsoft | 5.8% |
| 4 | Amazon | 3.7% |
| 5 | Alphabet (Google), class A shares | 3.1% |
| 6 | Broadcom | 2.6% |
| 7 | Alphabet (Google), class C shares | 2.5% |
| 8 | Meta Platforms | 2.4% |
| 9 | Micron Technology | 1.8% |
| 10 | Tesla | 1.6% |
Together, these 10 holdings make up about 39% of the whole index. Alphabet, Google's parent company, appears twice because it has two types of share. These weights change every day as share prices move.
What the S&P 500 invests in
How it has done
Over the 10 years to 30 September 2026, the S&P 500 returned about 15.3% a year in US dollars, with dividends reinvested. That's unusually strong, driven largely by the big technology companies. It doesn't mean the next 10 years will be the same, and there have been long periods when US shares went nowhere. For a UK investor, the return in pounds also depends on the exchange rate.
The main types of index
Index funds and ETFs follow many different indexes. These are the ones you're most likely to see, and what each one holds.
| Index | What it covers | Companies | What it's mostly made of | Recent average return |
|---|---|---|---|---|
| S&P 500 | About 500 of the largest US companies | 503 | Large US companies, with technology the biggest sector (about 40%) | 15.3% a year (10 years, in US dollars) |
| MSCI World | Large and medium-sized companies in 23 developed countries | 1,249 | About 73% US companies, plus other developed countries such as Japan, the UK and Canada | 12.6% a year (10 years, in pounds) |
| FTSE All-World | Developed and emerging markets together | About 4,260 | Similar to MSCI World, plus countries such as China, India and Taiwan | Not shown (no matching 10-year figure checked) |
| FTSE 100 | The 100 largest companies listed in London | 100 | Banks, oil, mining, medicines and consumer goods, many earning abroad | 8.8% a year (2016 to 2025, in pounds) |
| MSCI Emerging Markets | Companies in over 20 developing economies | 1,165 | China, Taiwan, India, South Korea and others | 8.8% a year (10 years, in pounds) |
| UK gilts | Loans to the UK government | Not companies | Bonds rather than shares, usually steadier, though gilts fell sharply in 2022 | About 0% a year (2016 to 2025) |
Figures are from 31 August to 8 October 2026. Past performance is not a reliable guide to future returns.
A global index such as MSCI World or FTSE All-World spreads your money furthest, though both are still mostly US companies. A single-country index such as the S&P 500 or FTSE 100 puts all your money into one country's stock market.
Things to check before you buy any fund
- Which index it follows, and how many companies and countries that covers.
- The cost: the ongoing charges figure (OCF) plus your platform's fee. Small differences add up over decades.
- Accumulating or income: accumulating funds reinvest dividends for you, income funds pay them out.
- Currency: overseas funds rise and fall with exchange rates as well as share prices.
- The account you hold it in: inside a stocks and shares ISA or a pension, you don't pay tax on the growth.
We don't recommend specific funds or ETFs. If you'd like help choosing, speak to a financial adviser authorised by the FCA. For free, impartial guidance, visit MoneyHelper.
What returns have looked like
| Type | Average | Period | Notes |
|---|---|---|---|
| Cash in UK bank accounts | 0.8% a year | 2016 to 2025 | Average rate actually paid on households' instant-access balances (Bank of England) |
| Bank of England Bank Rate | 1.8% a year | 2016 to 2025 | Average over the period. It's 3.75% today |
| UK inflation (CPI) | 3.3% a year | 2016 to 2025 | How fast prices rose on average (ONS) |
| UK government bonds (gilts) | About 0% a year | 2016 to 2025 | Total return, in pounds |
| UK shares (FTSE 100) | 8.8% a year | 2016 to 2025 | Total return, in pounds |
| Global shares (MSCI World) | 12.6% a year | 10 years to 30 September 2026 | Total return, in pounds |
| Global shares (MSCI World) | 8.0% a year | End of 2000 to 30 September 2026 | Total return, in pounds, over a longer period |
| US shares (S&P 500) | 15.3% a year | 10 years to 30 September 2026 | Total return, in US dollars |
| Emerging markets (MSCI Emerging Markets) | 8.8% a year | 10 years to 30 September 2026 | Total return, in pounds |
Share and bond figures are total returns, with dividends and interest reinvested, before fund and platform fees and before inflation. Past performance is not a reliable guide to future returns. The S&P 500 figure is in US dollars, so a UK investor's return would also have depended on the exchange rate.
The risks
- Share prices can fall sharply, sometimes by a third or more, and take years to recover.
- Past returns, including the strong last 10 years, are not a reliable guide to the future.
- That's why investing suits money you won't need for at least five years, and why your safety net should stay in cash.
Sources
Checked on 9 October 2026. Index holdings and returns change constantly.
- S&P Dow Jones Indices: S&P 500
- State Street: S&P 500 index holdings and sector weights (8 October 2026)
- MSCI World and Emerging Markets index factsheet (GBP, 30 September 2026)
- Vanguard: FTSE All-World index constituent numbers
- Bank of England: household sight deposit rates (series CFMHSCV)
- Bank of England: Bank Rate history
- ONS: CPI annual rate (D7G7)
- iShares: FTSE 100 and UK gilts index calendar-year returns
S&P 500 is a registered trade mark of Standard & Poor's Financial Services LLC. MSCI is a registered trade mark of MSCI Inc. FTSE is a registered trade mark of the London Stock Exchange Group. The names are used only to describe these indexes. Ask Axel isn't connected to, or endorsed by, any of these companies. Companies are named to explain what an index holds, not as a recommendation to buy their shares.
This page is general information, not personal financial advice. Read our full disclaimer.