There are thousands of stocks traded on major U.S. and Canadian markets. For instance, The New York Stock Exchange (NYSE) is the world’s largest exchange, with a market cap of $22.1 trillion (as of October 2022) and more than 2,575 listed domestic and international companies.

The NASDAQ is the second largest exchange in the U.S., with a market cap of $31.12 billion (as of January 2023) with over 4,000 listed companies.

The Toronto Stock Exchange (TSX), on the other hand, is the largest exchange in Canada. It has a market cap of $3.3 trillion with 3,289 listed domestic and international companies.

Companies choose to list on different exchanges for many reasons. The NASDAQ is known for being home to the biggest technology stocks in the world. The NYSE, which was founded in 1792, lists some of the world’s oldest, most well-known blue-chip stocks. The TSX, meanwhile, is typically known for commodity, energy, and financial stocks.

To keep track of stocks on the NYSE, NASDAQ, and TSX, companies are grouped into different sectors: Consumer Discretionary, Consumer Services, Consumer Staples, Energy, Financials, Healthcare, Industrials, Information Technology, Materials, Real Estate, and Utilities. From here, the sectors are broken down into subindustries.

Grouping stocks into sectors makes it easier to discover, compare, and conduct due diligence on companies. To get a better gasp on how the broader stock market is doing, there are indices that keep track of various publicly traded companies. Like an exchange, an index is also known for specializing in certain areas.

The most popular index in the U.S. is the Standard & Poor’s 500® Index, or S&P 500. For those interested in Canadian investing, one of the most popular indexes is the S&P/TSX 60.

What Are the S&P 500® and the S&P/TSX 60?

The S&P 500® is a market capitalization weighted index of the 500 leading publicly traded U.S. companies. Because the S&P 500® is weighted by market capitalization, a larger company will have a larger influence on how the index performs.

On top of that, the stocks listed in the S&P 500® account for around 80% of the total value of the U.S. stock market. As a result, the S&P 500® is an important barometer on the economic health of the overall U.S. economy.

But since the S&P 500® is a measure of the underlying performance of the stocks, this means you cannot invest in the index itself.

The S&P/TSX 60 meanwhile is a stock market index made up of 60 of the largest companies listed on the Toronto Stock Exchange. It provides insight into 10 industry sectors, the largest being Financials, Energy, and Industrials. The three biggest constituents of the S&P/TSX 60 are Royal Bank of Canada, Toronto-Dominion Bank, and Enbridge Inc.

Similar to the S&P 500®, the S&P/TSX 60 is market cap weighted and measures the performance of the large cap segment of the Canadian equity market. As a result, investors cannot buy the S&P/TSX 60 either.

Why Follow Traditional Indices?

Investors prefer to follow the performance of the S&P 500® and S&P/TSX 60 because it holds some of the largest companies in the U.S. and Canada.

This helps give investors a better technical understanding on support and resistance levels, which can influence entry and exit points.

As an economic barometer, the indices tend to respond to major economic data, including gross domestic product (GDP), interest rates, employment, retail sales, housing starts, and comments from the Bank of Canada and U.S. Federal Reserve.

Indices such as the S&P 500® and S&P/TSX60 are also updated on a quarterly basis, which can result in companies being dropped or added to the index.

All of this can have a major influence on investor sentiment and whether its improving or deteriorating.

How Do You Invest in the S&P 500® and S&P/TSX 60?

The most obvious way to invest in the S&P 500® and S&P/TSX60 would be to purchase shares in each company. That would be exceptionally cost prohibitive. Just buying one share each of Apple Inc, Microsoft Corp, Johnson & Johnson, Tesla Inc, and Berkshire Hathaway Inc would cost approximately $457,842.00.

A simple, one-ticket solution for gaining exposure to each stock on the S&P 500® and S&P/TSX 60 is through an ETF. Evolve ETFs offers two enhanced yield funds: the Evolve S&P/TSX 60 Enhanced Yield Fund (ETSX) and the Evolve S&P 500® Enhanced Yield Fund (ESPX).

The two funds are designed to provide investors with the performance of the S&P/TSX 60 and S&P 500® indices, with the addition of enhanced yield through active covered call strategies on the underlying securities.

ETSX and ESPX are the only Canadian ETFs tracking the S&P/TSX 60 and S&P 500® while writing calls on the underlying securities rather than the indices.

The ETSX and ESPX provide those investors with a covered call strategy and option writing that has the potential to add value to a portfolio while reducing volatility and enhancing returns.

Investing in Evolve’s ESPX and ETSX funds

For more information on the Evolve S&P 500® Enhanced Yield Fund (ESPX), explore fund details here.

For more information on the Evolve S&P/TSX 60 Enhanced Yield Fund (ETSX), explore fund details here.

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The contents of this blog are not to be used or construed as investment advice or as an endorsement or recommendation of any entity or security discussed. These contents are not an offer or solicitation of an offer or a recommendation to buy or sell any securities or financial instrument, nor shall it be deemed to provide investment, tax or accounting advice. The information contained herein is intended for informational purposes only.
Commissions, management fees and expenses all may be associated with exchange traded funds (ETFs) and mutual funds (funds). Please read the prospectus before investing. ETFs and mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated. There are risks involved with investing in ETFs and mutual funds. Please read the prospectus for a complete description of risks relevant to ETFs and mutual funds. Investors may incur customary brokerage commissions in buying or selling ETF and mutual fund units.
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