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 is one of the most popular funds. It 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. Also known as the SPY ETF, the fund was established in January 1993.

Key Takeaways

  • The SPDR S&P 500 ETF Trust is one of the most popular funds that aims to track the S&P 500 Index, which comprises 500 large-cap U.S. stocks.
  • SPY was the first index exchange-traded fund 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.
  • The SPDR S&P 500 ETF Trust has generated an average annual return of just under 10% since its inception.

Understanding the SPY ETF

As noted above, the SPY ETF was established on Jan. 22, 1993. It 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 remains one of the most actively traded, even with the advent of competing S&P 500 ETFs. In fact, it is considered to be the original fund that tracks the S&P 500.

The ETF was introduced in 1993 and had just $6.53 million in assets under management (AUM) at the time. After a rough start and some initial difficulty finding investors, it soared to more than $1 billion in AUM three years later. As of March 22, 2023, the ETF trust has an extraordinary $362.41 billion in assets.

SPY is listed on the New York Stock Exchange’s (NYSE) 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, and its distributor is ALPS Distributors. 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.

SPY turned 30 on Jan. 22, 2023, celebrating the milestone by remaining the largest ETF tracking the S&P 500 Index.

SPY ETF Portfolio Structure and Costs

Because of its relative age, the ETF is constructed as a unit investment trust (UIT). This means it's 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.

The SPY and other index ETFs provide investors a way to own the entire index by owning a single security for a low cost. As of March 22, 2023, SPY has an expense ratio of 0.0945%. 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 (VOO)’s expense ratio of 0.03%. Keep in mind that these fees do not include any broker fees or commissions.

Several ETFs 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 in which to invest.

SPY ETF Top Holdings

The SPY is a well-diversified basket of assets, which allocates its holdings across multiple sectors. The top five listed below are as of March 22, 2023:

  • Information technology: 25.84%
  • Healthcare: 14.40%
  • Financials: 13.08%
  • Consumer discretionary: 10.06%
  • Industrials: 8.65%

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 March 22, 2023)
Holding (Company) % SPY Portfolio Weight
Apple (AAPL) 7.13%
Microsoft (MSFT) 6.16%
Amazon (AMZN) 2.67%
NVIDIA (NVDA) 1.98%
Alphabet—Class A (GOOGL) 1.87%
Alphabet—Class C (GOOG 1.64%
Berkshire Hathaway—Class B (BRK.B) 1.64%
Tesla (TSLA) 1.56%
Meta Platforms—Class A (META) 1.35%
UnitedHealth Group (UNH) 1.35%
Source: State Street Global Advisors

SPY ETF Performance

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 12% as of Feb. 28, 2023. Based on trailing 10-year data, the fund generated average annual returns of 12.11%. Since the inception of the SPDR S&P 500 ETF Trust, the fund achieved average annual returns of 9.62%.

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 0.06 as of March 23, 2023.

SPY Turns 30

The SPY celebrated its 30th birthday on Jan. 22, 2023, by remaining the preeminent S&P 500 ETF despite having higher management fees compared to its younger rivals. While the SPY wasn’t a new strategy when it launched in 1993, it provided a revolutionary way to invest by trading similarly to a stock on an exchange. 

Apart from a first-mover advantage, several factors have cemented the SPY’s longevity:

  • The fund has benefited from a growing transition to passive investment management. Although active management funds have taken the lion’s share of net inflows over much of the last 30 years, that trend switched in 2018. And in 2021, the U.S. equity fund market share in passive funds reached 54%, partly due to the SPY’s successful long-term track record and growing AUM.
  • The S&P’s stellar performance, driven by large-cap technology stocks in the mid- to late 1990s and after the Great Recession, helped the SPY to continue attracting further inflows. From 1995 to 1999, the blue-chip index gained an average of 28% per year, while from 2009 to 2022, it gained more than 400%.

The ETF’s $380 billion asset base, coupled with an average daily trading volume (ADTV) of around $27 billion, makes the fund popular with investors who want cost-effect exposure to the S&P 500 and traders who seek deep liquidity. The SPY’s broad appeal assures that it will remain at the forefront of financial markets for the foreseeable future.

Does the SPDR S&P 500 ETF Trust pay a dividend?

Yes. As of March 22, 2023, the 12-month distribution yield for SPY is 1.65%.

Is SPY a Stock or Exchange-Traded Fund?

The SPY is an ETF. This 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 specific type of ETF issued by State Street Global Advisors that tracks a certain 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 March 22, 2023, the SPY has roughly $362.41 billion in assets under management.

The Bottom Line

The SPDR S&P 500 ETF Trust 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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  2. U.S. Securities and Exchange Commission. “Spiders (SPDRs).”

  3. State Street Global Advisors. "SPY: The Original S&P 500® ETF."

  4. U.S. Securities and Exchange Commission. “SPY: The Idea That Spawned an Industry.”

  5. Vanguard, Personal Investors. “VOO: Vanguard S&P 500 ETF.”

  6. Morningstar. “SPDR® S&P 500 ETF Trust: SPY.”

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  9. OfficialData.org. “Stock Market Returns Between 2009 and 2022.”

  10. CNBC. “The First ETF Is 30 Years Old This Week. It Launched a Revolution in Low-Cost Investing.”

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