By visionbooklet The SPDR S&P 500 ETF Trust is among the most popular exchange-traded funds (ETFs). It aims to track the Standard & Poor’s (S&P) 500 Index, which comprises 500 large-cap U.S. stocks. These stocks are selected by a committee based on market size, liquidity, and industry. The S&P 500 serves as one of the main benchmarks of the U.S. equity market and indicates the financial health and stability of the economy. Also known as the SPY ETF, it was established in January 1993.
Fidelity Investments. “SPDR S&P 500 ETF Trust: Overview.”
Read on to find out more about this fund, including its top holdings and investment style.
KEY TAKEAWAYS
- The SPDR S&P 500 ETF Trust is one of the most popular funds that aims to track the S&P 500 Index, which comprises 500 large-cap U.S. stocks.
- First index traded fund available on American markets was SPY.
- The information technology industry makes almost one-third of the SPY ETF investments.
- The SPDR S&P 500 ETF Trust has generated an average annual returnof just over 10% since its inception.
Understanding the SPY ETF
As said already, the SPY ETF opened on January 22, 1993. Track the S&P 500 with this ETF. Usually the first ETF registered even if other S&P 500 ETFs have been launched; it is still one of the most often traded ETFs. Considered to be the original fund tracking the S&P 500 is
The ETF had just $6.53 million in assets under management (AUM) when it launched. After a rough start and some initial difficulty finding investors, it soared to more than $1 billion in AUM three years later.2 As of September 25, 2024, the ETF trust’s total assets grew to $573.53 billion.
The New York Stock Exchange’s (NYSE) Arca exchange lists SPY, which investors may trade on several platforms. The trustee of the SPDR S&P 500 ETF Trust is State Street Bank and Trust, and its distributor is ALPS Distributors. Because ETF shares trade just like stocks, investors can buy and sell SPY shares via their broker throughout the day, including selling them short.
The price of a share of SPY is intended to be one-tenth that of the S&P 500 Index. So, if the S&P is at a level of 4,000, then one SPY share should trade at close to $400.
FAST FACT
SPY turned 31 on Jan. 22, 2024, celebrating the milestone by remaining the largest ETF tracking the S&P 500 Index.
SPY ETF Portfolio Structure and Costs
The ETF is built as a unit investment trust (UIT) due in great part to relative age via spy stock. This makes the portfolio fixed and composed of units redeemable with the issuer. Because of this structure, the SPY fully replicates the S&P 500 Index, holding all members of the underlying index at their target weights
The SPY and other index ETFs provide investors a way to own the entire index by owning a single security for a low cost. SPY has an expense ratio of 0.0945%. While this ratio is low, it is not the lowest among other ETFs that track the S&P 500 Index. SPY’s expense ratio is more than triple the Vanguard S&P 500 ETF (VOO)’s expense ratio of 0.03%. Keep in mind that these fees do not include any broker fees or commissions.
IMPORTANT
Several ETFs track the S&P 500 Index. Investors looking at such an ETF should consider the expense ratio, tracking error, and liquidity of the ETF before choosing one in which to invest.
SPY ETF Top Holdings
The SPY is a well-diversified basket of assets, which allocates its holdings across multiple sectors. The top five listed below are as of September 25, 2024:
- Information Technology: 31.55%
- Financials: 12.90%
- Healthcare: 11.67%
- Consumer Discretionary: 10.22%
- Communication Services: 8.77%4
The SPDR S&P 500 ETF Trust allocates almost all of its funds into common stocks, which are included in the S&P 500 Index. Its current top 10 holdings are in the following companies:4
| SPY ETF’s Top 10 Holdings (as of September 25, 2024) | |
|---|---|
| HOLDING (COMPANY) | % SPY PORTFOLIO WEIGHT |
| Apple (AAPL) | 7.14% |
| Microsoft (MSFT) | 5.59% |
| NVIDIA (NVDA) | 6.14% |
| Amazon (AMZN) | 3.74% |
| Alphabet Class A (GOOGL) | 1.96% |
| Meta Platforms—Class A (META) | 2.54% |
| Alphabet Class C (GOOG) | 1.90% |
| Berkshire Hathaway Class B (BRK.B) | 1.62% |
| Eli Lilly (LLY) | 1.51% |
| Broadcom (AVGO) | 1.68% |
SPY ETF Performance
With a four-star Morningstar rating, SPY’s returns have closely tracked the S&P 500, an index that has bested the average return of other large-blend funds in the past decade.7 The SPDR S&P 500 ETF Trust (SPY) has generated an average three-year return of 9.25% as of September 25, 2024. Based on trailing 10-year data, the fund generated average annual returns of 12.84%. Since the inception of the SPDR S&P 500 ETF Trust, the fund achieved average annual returns of 10.43%.
This, of course, tracks the S&P 500’s performance with a beta of nearly 1.00.8What is important to note is that the SPY ETF, as it fully replicates the index, has a very low relative tracking error—just 0.02% as of September 25, 2024.
SPY Turns 30
The SPY celebrated its 31st birthday on Jan. 22, 2024. It remains the preeminent S&P 500 ETF despite having higher management fees compared to its younger rivals.3 While the SPY wasn’t a new strategy when it launched in 1993, it provided a revolutionary way to invest by trading similarly to a stock on an exchange.
Apart from a first-mover advantage, several factors have cemented the SPY’s longevity:
- A increasing shift to passive investment management has helped the fund. Active management funds have received most net inflows for the past 30 years, but that changed in 2018. Passive funds surpassed active funds in market share. Passive assets exceeded $15.1 trillion by December 2023, while active assets were $14.3 trillion.
- The S&P’s outstanding performance in the mid-to-late 1990s and after the Great Recession helped the SPY attract more inflows. The blue-chip index increased 28% annually from 1995 to 1999 and over 400% from 2009 to 2023.
The ETF’s $573.53 billion asset base, coupled with an average daily trading volume (ADTV) of around $22 billion, makes the fund popular with investors who want cost-effective exposure to the S&P 500 and traders who seek deep liquidity use spy stock. The SPY’s broad appeal assures that it will remain at the forefront of financial markets for the foreseeable future.
Does the SPDR S&P 500 ETF Trust Pay a Dividend?
The 12-month distribution yield for SPY is 1.23% as of September 25, 2024.
Is SPY a Stock or Exchange-Traded Fund?
The Spy ETF is an ETF. A securities that tracks or aggregates shares in an index, sector, or other group is called this. State Street Global Advisors issues a particular kind of ETF called SPDRs, which follow a certain index, say the S&P 500. ETFs, despite trading like conventional shares of stock, are a portfolio of equities rather than one company.
What Does SPDR Stand For?
SPDR stands for Standard & Poor’s Depositary Receipt. SPDR ETFs have a fixed number of shares that are exchanged and traded like stocks on the open market.
Is the SPDR S&P 500 ETF Trust a Good Investment?
Yes. The SPY ETF diversifies exposure to the U.S. equity market and is suitable for investors willing to take on a moderate level of risk. Since it tracks the S&P 500 Index, it is often a suitable choice for those seeking passive index investing under spy stock.
The SPY receives investments of what amount of money?
As of September 25, 2024, the SPY has roughly $573.53 billion in assets under management.
The Bottom Line
Without having to buy several stocks, the SPDR S&P 500 ETF Trust provides investors with a quick approach to vary their exposure to the American equity market. As a result, the SPY is suitable for any investor who wants to incorporate American equities into their portfolio while maintaining a level of risk that is not excessive.
Having said that, the SPDR S&P 500 ETF Trust is subject to a great deal of risk because it tracks 500 large-cap stocks in the United States. These risks include market risk, nation risk, currency risk, economic risk, and interest rate risk. Investors should be aware of both American and worldwide economic data since financial statistics can influence the performance of funds.