With an expense ratio of 0.0945%, this ETF allows you to hold all stocks listed on the S&P 500 index
For those looking to invest in S&P 500 stocks, here is a profitable option for building long-term wealth. SPDR S&P 500 ETF Trust, popularly known as SPY in the American stock market circle, is the one to buy if you want to own the entire basket of stocks listed on the S&P 500 Index.
One of the attractive features of the SPDR ETF is its low expense ratio of 0.0945%. Expenses eat away at returns, the lower the ratio the better for the investor.
Exchange-traded funds that are passively managed are compared to an index in exactly the same proportion as the index it tracks. In doing so, SPDR S&P 500 ETF Trust seeks to provide investment results which, before expenses, generally correspond to the price and yield performance of the S&P 500 Index. This means that as an investor in SPDR S&P 500 ETF Trust, you can safely assume returns in line with the returns generated by the S&P 500 Index.
As of August 16, 2022, the S&P 500 at 4,305.20 is 9.67% lower since the start of the year while the SPDR S&P 500 ETF Trust with a net asset value of $428.55 is 10% lower since the beginning of the year.
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By investing in SPDR S&P 500 ETF Trust, you gain exposure to some of the well-known names in the US stock market. From Microsoft, Apple and Amazon to Meta (parent company of Facebook), Berkshire Hathaway, Visa and many more, the best companies in the world can be part of your portfolio. Information technology, healthcare and communication services are the top three sectors, totaling around 50% of the S&P 500 index.
Launched in January 1993, SPY is the very first exchange-traded fund listed in the United States. The SPDR S&P 500 ETF primarily holds large-cap U.S. stocks and consists of a portfolio representing all 500 stocks in the S&P 500 Index.
As of August 16, 2022, the SPDR ETF’s total assets under management were approximately $393,751.77 million and the net asset value was $429.68.
SPDR ETF’s long-term performance was in double digits. Over the 10-year period (as of June 30, 2022), the compound annualized return was around 12.82%, while the 3-year and 5-year return was around 10.47% and 11.16 %, respectively.
SPDR ETF is traded on major US exchanges and it is easy to trade there. Similar to buying stocks, you can buy SPY ETFs through a US registered brokerage account. And once invested, you can also use traditional stock trading techniques such as stop orders, limit orders, margin buying and short selling using ETFs.
Also read: Top 5 Equity Holdings in Warren Buffett’s Berkshire Hathaway Portfolio
Investing in the stock market is risky because stocks as an asset class are inherently volatile. However, in the longer term, the risk decreases and stock values tend to rise. Therefore, it is suggested to hold stocks for a longer duration to minimize risk and volatility. The key to generating high inflation-adjusted returns from stocks is the right selection of individual stocks. This is important because not every stock in your portfolio can be multi-bagger. The solution is to hold a set of stocks through a mutual fund or an exchange-traded fund (ETF).