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

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Looking for broad exposure to the Large Cap Blend segment of the US equity market? You should consider the SPDR S&P 500 ETF (SPY), a passively managed exchange traded fund launched on 01/29/1993.

The fund is sponsored by State Street Global Advisors. It has amassed assets over $377.02 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. Considered a more stable option, large cap companies boast more predictable cash flows and are less volatile than their mid and small cap counterparts.

Blend ETFs are aptly named, since they tend to hold a mix of growth and value stocks, as well as show characteristics of both kinds of equities.

Costs

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

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 1.46%.

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 27.90% of the portfolio. Healthcare and Financials round out the top three.

Looking at individual holdings, Apple Inc. (AAPL) accounts for about 6.63% of total assets, followed by Microsoft Corporation (MSFT) and Amazon.com Inc. (AMZN).

The top 10 holdings account for about 27.34% 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 has lost about -13.14% so far this year and is down about -5.14% in the last one year (as of 08/01/2022). In the past 52-week period, it has traded between $365.86 and $477.71.

The ETF has a beta of 1 and standard deviation of 23.81% for the trailing three-year period, making it a medium risk choice in the space. With about 505 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 reasonable 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 $260.09 billion in assets, iShares Core S&P 500 ETF has $306.38 billion. VOO has an expense ratio of 0.03% and IVV charges 0.03%.

Bottom-Line

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also 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.


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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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