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What is the SPY ETF? The SPY ETF or SPDR S&P 500 Trust ETF is an ETF that tracks the S&P 500 index, an index that comprises 500 large-cap US stocks. Launched in January 1993, the SPY ETF is the first exchange-traded fund launched in the United States.
Before going into more details about the SPY ETF, we will quickly take a look at what is meant by ETFs. ETFs or exchange-traded funds are a favorite for investors who want to create a diversified portfolio. They offer several benefits. First, ETFs let investors diversify their portfolios across different assets, sectors, or themes. Also, they are cost-efficient and are well-suited for long-term investments. For the beginner investor who may not have the expertise to pick individual stocks, ETFs could be a good way to get started investing in the US.
Here are five things you need to know about the SPY ETF:-
1. It is the largest of all S&P 500 ETFs
The SPY ETF was the first ETF listed in the US in January 1993. As of May 5, 2022, it was the ETF with the largest assets under management (AUM) of $371 billion. It is also the ETF with the highest liquidity. The SPY stock price (NAV) stood at $413.61 on the same day.
2. Its holdings consist of companies across all eleven GICS sectors
According to the Global Industry Classification Standard (GICS), there are 11 financial sectors. Just like the S&P 500, the SPY ETF consists of holdings across all these sectors. As on May 5, 2002, the breakup is- Information Technology (27.3%), Health Care (14.1%), Consumer Discretionary (11.2%), Financials (11.1%), Communication Services (8,8%), Industrials (7.9%), Consumer Staples (6.7%), Energy (4.5%), Utilities (2.9%), Real Estate (2.8%), and Materials (2.9%). Hence, when you invest in the SPDR S&P 500 Trust ETF, you get exposure to all the above sectors.
3. Its top ten holdings are heavily weighted in technology companies
Technology giants such as Apple, Microsoft, Amazon, Tesla, Alphabet (Google), Meta Platforms (Facebook), and Nvidia are among its top ten holdings. As we have seen, 27.3% of the fund is allocated to the Information Technology sector.Â
4. It has got an expense ratio of 0.0945%
The SPY ETF has got an expense ratio of 0.09%. It means that it charges around $9 for every $10,000 invested in it. Though it is low, other S&P 500 ETFs have an even lower expense ratio. For example, the Vanguard S&P 500 ETF (VOO) has an expense ratio of 0.03% as of May 2021.
5. It has generated consistent returns since inception
The SPY ETF has generated a return of over just over 10% since inception. Based on trailing 10-year data the fund has generated average annual returns of 14.6%. However, it is important to note that past returns are not an indication of future performance and investors should always invest with a long-term horizon in mind.
Investing in the SPY ETF lets an investor invest in S&P 500 companies without buying individual stocks. You can invest in the SPY ETF from the Vested platform. However, it is important to be aware of the associated fees and expenses before investing.
