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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 $496.38 billion, making it the largest ETFs attempting to match the Large Cap Blend segment of the US equity market.

Why Large Cap Blend

Large cap companies typically have a market capitalization above $10 billion. Considered a more stable option, large cap companies boast more predictable cash flows and are less volatile than their mid and small cap counterparts.

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Blend ETFs usually hold a mix of growth and value stocks as well as stocks that exhibit both value and growth characteristics.

Costs

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.

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 1.31%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Information Technology sector--about 29.20% of the portfolio. Financials and Healthcare round out the top three.

Looking at individual holdings, Apple Inc (AAPL) accounts for about 7.33% of total assets, followed by Microsoft Corp (MSFT) and Amazon.com Inc (AMZN).

The top 10 holdings account for about 30.71% 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 span over 25 separate industry groups.

The ETF return is roughly 6.77% so far this year and is up about 29% in the last one year (as of 02/23/2024). In the past 52-week period, it has traded between $385.36 and $507.50.

The ETF has a beta of 1 and standard deviation of 17.45% for the trailing three-year period, making it a medium risk choice in the space. With about 504 holdings, it effectively diversifies company-specific risk.

Alternatives

SPDR S&P 500 ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, SPY is a sufficient option for those seeking exposure to the Style Box - Large Cap Blend area of the market. Investors might also want to consider some other ETF options in the space.

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 $408.93 billion in assets, iShares Core S&P 500 ETF has $441.93 billion. VOO has an expense ratio of 0.03% and IVV charges 0.03%.

Bottom-Line

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

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.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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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Zacks Investment Research