A:

The term spider is the commonly-used expression to describe the the Standard & Poor's Depository Receipt (SPDR). This type of investment vehicle is an exchange-traded fund (ETF). You can think of an ETF as a basket of securities (like a mutual fund) that trades like a stock. In the case of spiders, the basket of stocks is the S&P 500 index. One of the reasons for buying a SPDR is that it is a quick and easy way to have significant diversification. SPDRs are also relatively inexpensive compared to what it would cost to create this type of portfolio yourself.

SPDRs contain one-tenth of the S&P 500 index portfolio, which is why the cost to buy one unit of this asset is nearly equal to one-tenth of the S&P 500 index level. SPDRs trade on the American Stock Exchange (AMEX) under the symbol SPY. Like all ETFs, they trade in the same manner as regular stocks having continuous liquidity and provide regular dividend payments. This type of investment is ideal for those who believe in passive management, a strategy that attempts to mirror a market index with no desire to try and beat the market. See our Special Feature: Exchange-Traded Funds for everything you need to know about ETFs.

For more on index investing, check out Index Investing Tutorial, Introduction To Exchange-Traded Funds and Advantages Of Exchange-Traded Funds.

RELATED FAQS
  1. Who's in charge of managing exchange-traded funds?

    An exchange-traded fund (ETF) is a security that tracks an index but has the flexibility of trading like a stock. Just like ... Read Answer >>
  2. What is the difference between iShares, VIPERs and Spiders?

    iShares, VIPERs and spiders each represent different exchange-traded fund (ETF) families. In other words, an individual company ... Read Answer >>
  3. How does a point change in a major index effect its equivalent exchange-traded fund?

    The S&P 500 and Dow Jones Industrial Index (DJIA) are two of the most well-known indexes tracking the movement of the ... Read Answer >>
  4. What's the difference between an index fund and an ETF?

    Learn about the difference between an index fund and an exchange-traded fund and how index fund investing compares to value ... Read Answer >>
  5. Should I invest in ETFs or index funds?

    Learn advantages to investing in exchange-traded funds, or ETFs, and index funds, and decide whether to include them in your ... Read Answer >>
  6. Is it possible to invest in an index?

    First, let's review the definition of an index. An index is essentially an imaginary portfolio of securities representing ... Read Answer >>
Related Articles
  1. Mutual Funds & ETFs

    What Are SPDR ETFs?

    Spiders are exchange-traded funds based on an index and can be a great vehicle both for making money and hedging against other risks.
  2. Mutual Funds & ETFs

    Exchange-Traded Funds

    Introduction
  3. Investing

    Advising FAs: Explaining ETFs to a Client

    Exchange traded funds (ETFs) have exploded in popularity with both investors and professionals for several reasons, and their growth shows no sign of slowing.
  4. Mutual Funds & ETFs

    Exchange-Traded Funds: Introduction

    Exchange-traded funds (ETFs) can be a valuable component for any investor's portfolio, from the most sophisticated institutional money managers to a novice investor who is just getting started. ...
  5. Mutual Funds & ETFs

    Exchange-Traded Funds: Background

    Compared to mutual funds, ETFs are relatively new. The first U.S. ETFs were created by State Street Global Advisors with the launch of the S&P 500 depositary receipts, also know as SPDRs ...
  6. Professionals

    Exchange Traded Funds (ETFs)

    CFA Level 1 - Exchange Traded Funds (ETFs). Learn how exchange traded funds look to mimick the overall market's return. Covers the advantages and risks of ETFs, and how they trade.
  7. Top ETFs and What They Track: Introduction to ETFs

    Investopedia explains: An Exchange-Traded Fund (ETF) is an investment fund that tracks an index, specific asset or basket of assets to which it is pegged.
  8. Mutual Funds & ETFs

    Exchange-Traded Funds: Index Funds Vs. ETFs

    In much of the previous discussion comparing mutual funds to ETFs, the merits of actively managed mutual funds are compared to the passively managed ETFs. In some ways, it is like comparing apple ...
  9. Mutual Funds & ETFs

    6 Popular ETF Types For Your Portfolio

    Exchange traded funds are an extremely popular diversification tool that can protect your portfolio during troubled periods.
  10. Mutual Funds & ETFs

    Exchange-Traded Funds: SPDR S&P 500 ETF

    The first, and most popular, ETF in the U.S. is the SPDR S&P 500 ETF (AMEX:SPY). It tracks one of the most popular indexes in the world, the S&P 500 Index. It is managed by State Street ...
RELATED TERMS
  1. Spiders - SPDR

    A short form of Standard & Poor's depositary receipt, an ...
  2. Index ETF

    Exchange-traded funds that follow a specific benchmark index ...
  3. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  4. Exchange-Traded Mutual Funds

    Investopedia explains the definition of exchange-traded mutual ...
  5. Passive ETF

    One of two types of exchange-traded funds (ETFs) available for ...
  6. Index Fund

    An index fund is a type of mutual fund with a portfolio constructed ...

You May Also Like

Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  3. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  4. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  5. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  6. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
Trading Center