SPY ETF: What the SPDR S&P 500 ETF Trust Is and What It Holds

What Is the SPY ETF?

The SPDR S&P 500 ETF Trust, also known as the SPY ETF, is one of the most popular funds that aims to track the Standard & Poor’s (S&P) 500 Index, which comprises 500 large-cap U.S. stocks. These stocks are selected by a committee based on market size, liquidity, and industry.

The S&P 500 serves as one of the main benchmarks of the U.S. equity market and indicates the financial health and stability of the economy.

Key Takeaways

  • The SPDR S&P 500 ETF Trust, also known as the SPY ETF, is one of the most popular funds that aims to track the Standard & Poor’s 500 Index, which comprises 500 large-cap U.S. stocks.
  • SPY was the first index exchange traded fund (ETF) listed on U.S. exchanges.
  • It fully replicates the index at a price target of 10% of the S&P 500.
  • Approximately one-quarter of the SPY ETF is invested in the information technology sector.
  • With a four-star Morningstar rating, the SPDR S&P 500 ETF Trust has generated an average annual return of just over 10% since inception.

Understanding the SPY ETF

The SPY is an exchange-traded fund (ETF) that tracks the S&P 500 index. It is often regarded as the first ETF to be listed, and it remains one of the most actively traded, even with the advent of competing S&P 500 ETFs.

The SPY was first introduced in 1993 and had just $6.53 million in assets when it began. After a rough start and some initial difficulty finding investors, it subsequently soared to more than $1 billion in assets under management (AUM) in three years. As of July, 2022, the ETF trust has an extraordinary $350 billion in assets.

SPY is listed on the New York Stock Exchange’s Arca exchange, and investors can trade this ETF on multiple platforms. The trustee of the SPDR S&P 500 ETF Trust is State Street Bank and Trust Co., and its distributor is ALPS Distributors Inc. Because ETF shares trade in a similar manner to stocks, investors can buy and sell SPY shares via their broker throughout the day, including selling them short.

The price of a share of SPY is intended to be one-tenth that of the S&P 500 Index. So, if the S&P is at a level of 4,000, then one SPY share should trade at close to $400.

Special Considerations

Because of its relative age, the SPY is constructed as a unit investment trust (UIT), a fixed portfolio that forms units that can be created and redeemed with the issuer. Because of this structure, the SPY fully replicates the S&P 500 Index, holding all members of the underlying index at their target weights.

Today, the SPY and other index ETFs provide investors a way to own the entire index by owning a single security and for a low cost. The SPY has a 0.0945% expense ratio as of July 2022. While this ratio is low, it is not the lowest among other ETFs that track the S&P 500 Index. SPY’s expense ratio is more than triple the Vanguard S&P 500 ETF’s (VOO) expense ratio of 0.03%. These fees do not include any broker fees or commissions.

Today, there are several ETFs that track the S&P 500 index. Investors looking at such an ETF should consider the expense ratio, tracking error, and liquidity of the ETF before choosing one to invest in.

What the SPY Top Holdings Are

The SPY is a well-diversified basket of assets, which allocates its holdings across multiple sectors, the top five listed below are as of June 30, 2022:

  • Information Technology: 26.8%
  • Healthcare: 15.1%
  • Financials: 10.8%
  • Consumer Discretionary: 10.5%
  • Communication Services: 8.9%

The SPDR S&P 500 ETF Trust allocates almost all of its funds into common stocks, which are included in the S&P 500 Index. Its current top 10 holdings are in the following companies:

SPY ETF’s Top 10 Holdings (as of June 30, 2022)
Holding (Company) % SPY Portfolio Weight
Apple Inc. (AAPL) 6.6%
Microsoft Corp. (MSFT) 6.0%
Amazon.com Inc. (AMZN) 2.9%
Alphabet Inc. — Class A (GOOGL 2.0%
Alphabet Inc. — Class C (GOOG 1.9%
Tesla Motors (TSLA) 1.8%
Berkshire Hathaway Inc. — Class B (BRK.B) 1.6%
UnitedHealth Group Inc. (UNH) 1.5%
Johnson & Johnson (JNJ) 1.5%
NVIDIA Corp. (NVDA) 1.2%
Source: State Street Global Advisors

How the SPY Has Performed

With a four-star Morningstar rating, SPY’s returns have closely tracked the S&P 500, an index that has bested the average return of other large-blend funds in the past decade. The SPDR S&P 500 ETF Trust (SPY) has generated an average three-year return of 10.65% as of July 2022. Based on trailing 10-year data, the fund generated average annual returns of 12.98%. Since the inception of the SPDR S&P 500 ETF Trust, the fund achieved average annual returns of 9.64%.

This, of course, tracks the S&P 500’s performance (with a beta of nearly 1.00). What is important to note is that the SPY ETF, as it fully replicates the index, has a very low relative tracking error—just 0.02 as of July 2022.

Does the SPDR S&P 500 ETF Trust (SPY ETF) Pay a Dividend?

Yes. As of July 2022, its 12-month distribution yield is 1.69%.

Is SPY a Stock or an ETF?

The SPY is an ETF. An exchange traded fund (ETF) is the broad name for a kind of security that aggregates or tracks multiple stocks within an index, industry, or another grouping. SPDRs are a type of specific ETF issued by State Street Global Advisors that tracks a specific index such as the S&P 500. While ETFs may trade like ordinary shares of stock, they represent a portfolio of stocks and not just one company.

What Does SPDR Stand for?

SPDR stands for Standard & Poor’s Depositary Receipt. SPDR ETFs have a fixed number of shares that are exchanged and traded like stocks on the open market.

Is the SPDR S&P 500 ETF Trust a Good Investment?

Yes. The SPY ETF diversifies exposure to the U.S. equity market and is suitable for investors willing to take on a moderate level of risk. Since it tracks the S&P 500 index, it is often a suitable choice for those seeking passive index investing.

How Much Money Is Invested in the SPY?

As of July 2022, the SPY had roughly $350 billion in assets under management (AUM).

The Bottom Line

The SPDR S&P 500 ETF Trust (SPY) offers investors an efficient way to diversify their exposure to the U.S. equity market without having to invest in multiple stocks. Therefore, the SPY is suitable for any investors who want to include U.S. equities in their portfolio while taking only a moderate level of risk.

That being said, since the SPDR S&P 500 ETF Trust tracks 500 large-cap stocks in the United States, it carries a multitude of risks, such as market risk, country risk, currency risk, economic risk, and interest rate risk. Investors should be aware of both world and U.S. economic data, which could affect the performance of the fund.

Article Sources
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  1. State Street Global Advisors. “SPDR® S&P 500® ETF Trust.”

  2. U.S. Securities and Exchange Commission. "SPY: The Idea That Spawned an Industry."

  3. U.S. Securities and Exchange Commission. "Spiders (SPDRs)."

  4. Vanguard. “Vanguard S&P 500 ETF (VOO).”

  5. Morningstar. "SPDR® S&P 500 ETF Trust."

  6. ETF.com. "SPY SPDR S&P 500 ETF Trust."

  7. Fidelity. "Key Statistics: SPY."

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