What is a spider and why should I buy one?
The term spider is the commonly-used expression to describe 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. (For more, see: What Are SPDR ETFs?)
How and Where SPDRs Trade
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 New York Stock Exchange (NYSE) under the symbol SPY. Launched in 1993 by State Street Global Advisors, SPY was the first U.S.-listed ETF and is the world's largest.
As my peers have pointed out, "Spider" is Wall Street term for an exchange traded fund (ETF) with the ticker symbol SPY. It is a basket of the stocks in the S&P 500, weighted in direct proportion to the weight of the index.
A broad market ETF like this is absolutely the best building block for any portfolio, but the SPY ETF is no longer the best version of this type of investment. Other ETFs like ITOT, SCHB or VTI are better bets than SPY, from a cost and diversification perspective.
A spider is an exchange-traded fund (ETF) sponsored by State Street Global Advisors, one of leaders in ETFs. There are well over 100 SPDR ETFs, including U.S. equities, International equities, fixed income, smart beta, commodities, real assets, and actively managed. ETFs are similar to mutual funds, but their annual expense ratios are usually significantly lower and they are bought and sold over the course of the trading day.
Whether you should buy a SPDR depends on your asset allocation and your preferences in each of the asset classes included. You may want to go to www.spdrs.com for the complete list of available ETFs known as SPDRs.
Don't worry if you have arachnophobia! The term Spider is used to describe SPY, an index Exchange-Traded Fund that attempts to mirror the S&P 500. The S&P 500 is a common proxy for the "Market." This is a common index for mutual funds. You may have purchased index funds with a company like Vanguard that do the same thing as SPY.
The advantages to owning it are cheap exposure to 500 of the largest companies in the US Stock Market and it is very liquid, meaning you can trade it throughout the trading day, unlike an open-ended mutual fund that only trades based on the end-of-day closing price. You can also trade options on it, which may allow you to increase or decrease risk and increase income.
The disadvantages are that it is weighted based on market capitalization; meaning large companies like Exxon have a larger impact on its price. It also contains only US large-cap stocks, so small, mid, international, and emerging markets are all overlooked. You are missing out on thousands of stocks that make up the real "market."
It can be a good core to your portfolio, but for most, more exposure is needed.
Mark Struthers CFA, CFP®
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This is for informational purposes only. Your specific situation would need to be taken into account. All information is subject to change. Not to be considered investment, tax, or legal advice.
SPDR S&P 500 fund. Ticker: SPY.
It's the largest and oldest ETF and ubiquitous among traders and investors for gaining exposure to (owning a piece of) the US Equity Market.
To answer your question literally, you only need a few hundred dollars to buy one (1 share). Although, I would recommend talking to a professional about how much you might need, want, or IF you should buy any at all, to achieve your goals.
When you reference "Spider," I think you are referring to SPDR which is a group of exchange traded funds (ETF's) under the State Street Global Advisors platform. Similar to a mutual fund, ETF's can be a good way for an investor to get broad diversification in the market at a low cost.