Spy ETF
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The Spy ETF or SPDR S&P 500 ETF is a family of exchange traded funds managed by State Street Global Advisors. SPDR is the acronym for Standard & Poor’s Depositary Receipts and these ETFs are listed as SPY on the New York Stock Exchange (NYSE).[br]
The Spy ETF or SPDR S&P 500 ETF is a family of exchange traded funds managed by State Street Global Advisors. SPDR is the acronym for Standard & Poor’s Depositary Receipts and these ETFs are listed as SPY on the New York Stock Exchange (NYSE).[br]
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History of Spy ETFs
SPDR ETFs were the world’s first ETFs. They were devised by American Stock Exchange executive Nathan Most. The fund was first traded on the American Stock Exchange and was later listed on almost all leading exchanges.
As of June 2009, SPDR ETFs were the largest exchange traded funds, with a market cap of $70.7 billion.
Spy ETF and the S&P 500 Index
SPDR ETFs tracks the S&P 500 index and each share of Spy is equivalent to a tenth of the value of the S&P 500 index. This index is considered as the bellwether for the entire US stock market. It comprises 500 companies across 26 sectors. Market cap is used by this index to evaluate each company on a relative scale.
Spy ETF Holdings
As they represent the S&P 500 index, Spy ETFsindirectly invest in the stocks of all the companies that are listed in this index. Therefore, the holdings contain 500 companies, albeit not at the same ratio.
As on July 24, 2009, the ratio of investment in the top companies was:
|
Company name
|
% Net assets
|
|
ExxonMobil Corporation
|
4.22%
|
|
Microsoft Corporation
|
2.25%
|
|
Johnson & Johnson
|
1.93%
|
|
Procter & Gamble Company
|
1.84%
|
|
AT&T, Inc.
|
1.81%
|
|
International Business Machines Corp
|
1.71%
|
|
J.P. Morgan Chase & Co
|
1.64%
|
|
Chevron Corporation
|
1.64%
|
|
Apple, Inc
|
1.57%
|
|
General Electric Company
|
1.53%
|
Advantages of Spy ETFs
There are many advantages of Spy ETFs, such as:
- The SPY management ratio is much lower than that of actively managed funds. Thus, Spy ETFs can be used for low cost investments.
- Spy ETFs can be bought on small margins and sold short.
- They have narrower spreads.
Disadvantages of Spy ETFs
Being highly diversified, Spy ETFs have the following disadvantages:
- The profits are smaller than with other investments.
- If the company with the largest investment ratio collapses, the ETF incurs heavy losses.
Despite smaller profits, SPDR S&P 500 ETFs attract traders because of their role as hedging instruments.
