The S&P 500 (SNPINDEX:$SPX) market index is pretty broad. It tracks the performance of roughly 500 stocks, hand-picked by an expert panel to reflect the large-cap portion of the American stock market.
The index is often seen as an accurate barometer of the stock market as a whole. Exchange-traded funds (ETFs) that copy the S&P 500 index returns are among the most popular and heavily traded names on the market. The SPDR S&P 500 Trust (NYSEMKT:SPY) has more assets under management than any other ETF. The Vanguard S&P 500 ETF (NYSEMKT:VOO) comes next, followed by the iShares Core S&P 500 ETF (NYSEMKT:IVV). These are the only ETFs worth more than $600 billion each. No other fund reaches the $500 billion level today.
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But the S&P 500 doesn't look at every big-name, large-cap stock. Some surprising names are not components of this popular index, so the funds listed above won't give you any exposure to them.
Let's take a look at four large and well-known stocks that are not members of the S&P 500 group. I'll explain why they have been left in the cold, and suggest alternative index-fund ETFs where they do belong.
1. Taiwan Semiconductor
This one is easy. Taiwan Semiconductor Manufacturing (NYSE:TSM) is not an S&P 500 stock, and probably never will be. The selection panel only considers companies with U.S. headquarters, and Taiwan Semi is based in (yeah, you guessed it!) Taiwan.
That's how a chip-making giant with a rare trillion-dollar market cap falls away from the S&P 500 index. It would have to relocate its leadership team to American soil before even applying for membership to this exclusive -- and all-American -- club.
But more than 120 ETFs currently include some Taiwan Semi shares on their component lists. It is the largest holding by far in the S&P World Ex-US ETF, for example. It's an obvious favorite in the VanEck Semiconductor ETF (NASDAQ:SMH), where only Nvidia (NASDAQ:NVDA) represents a larger slice of the ETF. These exchange-traded funds can broaden your portfolio's exposure to foreign tech stocks -- led by Taiwan Semi.
2. Spotify
Media-streaming veteran Spotify (NYSE:SPOT) is another foreign business. Founded in Stockholm, Sweden, the company legally relocated to Luxembourg for tax reasons, though it still largely runs the business from its Swedish and American offices.
Like Taiwan Semi, Spotify is a very large company with lots of deeply engaged investors -- and more than 120 ETFs including this name on their rosters. It's the top holding of the First Trust International Equity Opportunities ETF and 9 different Vanguard ETFs. It's easy to add Spotify's innovative media services to your portfolio via ETFs, despite the lack of an S&P 500 membership.
3. Shopify
Canada is a North American country, but it isn't the United States of America. Therefore, Ottawa-based e-commerce giant Shopify (NYSE:SHOP) isn't invited to the S&P 500 party, either. But you still have dozens of fund options, as roughly 75 ETFs currently hold some Shopify shares. Shopify is the flagship holding of Cathie Wood's ARK Fintech Innovation ETF (NYSEMKT:ARKF), representing 10% of the fund's total value.
4. Coinbase International
The second-largest holding in that ARK fund happens to be Coinbase International (NASDAQ:COIN) -- the next name on my list. With a name like that, surely I'm talking about another non-U.S. stock, right? Let's move on.
Well, not so fast. Coinbase doesn't actually have a building to serve as headquarters, operating as a fully remote business. But it was founded in San Francisco, California, and organized as a Delaware corporation, so the cryptocurrency services giant definitely qualifies as an American company.
This stock stands on the threshold of S&P 500 inclusion. It's more than large enough, boasting a $66 billion market cap at recent prices. As noted, it's certainly American enough. The stock tends to rise ahead of each scheduled S&P 500 roster update, anticipating its upcoming inclusion.
But Coinbase's stock was skipped in eight S&P 500 updates last year. The latest rumor mill rumblings of a more positive outcome in the March 2025 index review might be right, but there are no guarantees. After all, there are 13 even larger American companies waiting for their S&P 500 invitations. The traditional-minded S&P 500 selection panel may simply not be ready to embrace cryptocurrency-related stocks in the prestigious S&P 500 index. If and when it happens, Coinbase's inclusion would be a watershed moment for this newfangled market sector.
Don't worry -- there are over 160 ETFs not named S&P 500 with Coinbase among their holdings. The list includes four of Cathie Wood's ARK funds, 11 SPDR ETFs, and 14 names from the Vanguard family. Coinbase is one of the top three ideas in the famous ARK Innovation ETF (NYSEMKT:ARKK) and the largest stock in the ARK 21Shares Blockchain and Digital Economy Innovation ETF. Wood and her analyst teams hold Coinbase in high regard.
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Anders Bylund has positions in Coinbase Global, Nvidia, and Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Coinbase Global, Nvidia, Shopify, Spotify Technology, Taiwan Semiconductor Manufacturing, and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
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