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Should SPDR S&P 500 ETF (SPY) Be on Your Investing Radar?


The SPDR S&P 500 ETF (SPY) was launched on 01/29/1993, and is a passively managed exchange traded fund designed to offer broad exposure to the Large Cap Blend segment of the US equity market.

The fund is sponsored by State Street Global Advisors. It has amassed assets over $426.54 billion, making it the largest ETFs attempting to match the Large Cap Blend segment of the US equity market.

Why Large Cap Blend

Companies that fall in the large cap category tend to have a market capitalization above $10 billion. Overall, they are usually a stable option, with less risk and more sure-fire cash flows than mid and small cap companies.

Typically holding a combination of both growth and value stocks, blend ETFs also demonstrate qualities seen in value and growth investments.

Costs

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF’s expense ratio.

Annual operating expenses for this ETF are 0.09%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 1.21%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund’s holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Information Technology sector–about 28.40% of the portfolio. Consumer Discretionary and Healthcare round out the top three.

Looking at individual holdings, Microsoft Corporation (MSFT) accounts for about 6.32% of total assets, followed by Apple Inc. (AAPL) and Amazon.com Inc. (AMZN).

The top 10 holdings account for about 29.08% of total assets under management.

Performance and Risk

SPY seeks to match the performance of the S&P 500 Index before fees and expenses. The S&P 500 Index is composed of five hundred selected stocks, all of which are listed on national stock exchanges and spans over 25 separate industry groups.

The ETF has gained about 28.05% so far this year and is up about 31.39% in the last one year (as of 11/18/2021). In the past 52-week period, it has traded between $355.33 and $469.28.

The ETF has a beta of 0.99 and standard deviation of 22.32% for the trailing three-year period, making it a medium risk choice in the space. With about 506 holdings, it effectively diversifies company-specific risk.

Alternatives

SPDR S&P 500 ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, SPY is an outstanding option for investors seeking exposure to the Style Box – Large Cap Blend segment of the market. There are other additional ETFs in the space that investors could consider as well.

The Vanguard S&P 500 ETF (VOO) and the iShares Core S&P 500 ETF (IVV) track the same index. While Vanguard S&P 500 ETF has $273.20 billion in assets, iShares Core S&P 500 ETF has $325.15 billion. VOO has an expense ratio of 0.03% and IVV charges 0.03%.

Bottom-Line

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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SPDR S&P 500 ETF (SPY): ETF Research Reports
 
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
Apple Inc. (AAPL) : Free Stock Analysis Report
 
Microsoft Corporation (MSFT) : Free Stock Analysis Report
 
Vanguard S&P 500 ETF (VOO): ETF Research Reports
 
iShares Core S&P 500 ETF (IVV): ETF Research Reports
 
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