SPDR S&P 500 ETF: ETF Opinions, Should You Invest?

L’ETF SPDR S&P 500 it is the largest index fund in the world.

It is undoubtedly a very interesting fund, especially for novice investors.

In this article we will therefore analyze the characteristics of this fund, his costshis advantages they disadvantagesand finally I’ll give you mine opinions to about.

Read on to learn more!

A few words about SPDR S&P 500 ETF

Before starting with the background analysis, a clarification needs to be made as there is some confusion in this regard.

Il SPY stock is the SPDR S&P 500 trust stock and is traded on the NYSE Arca. The reference symbol is NYSE Ark: SPY.

Initially the fund was called in full Standard & Poor’s Depositary Receiptsthen the acronym was preferred.

Il exchange traded fund was created in 1926.

What does he invest in?

First of all it is the most big bottom on the S&P 500, or the stock index that invests in the American economy.

It owns every stock in the Standard & Poor’s 500 index. Maybe you know, but SPDR S&P 500 is used as a market measure by both trader than investors, as it tracks the rise and fall of the 500 largest stocks traded on US stock exchanges.

In fact, the S&P 500 index is made up of 500 stocks that manage to cover more than 24 groups sectoral including telecommunications services, industry, consumer goods, energy, financial and information technology sectors.

More generally, this index follows the trend of a basket consisting of 500 shares issued by the largest US companies. These shares are of companies listed on the Nasdaq, the Amex (American Stock Exchange) and the NYSE (New York Stock Exchange).

The index associates a particular weight to individual shares based on their market value and in fact represents the most important index of the American stock exchange.

So, let’s talk about an ETF (ETF SPDR S&P 500 (SPY): is nothing but a fund whose objective is to replicate the performance and price of the S&P 500 index as best as possiblei.e. the most important index of the American Stock Exchange.

Main characteristics of the ETF

The fund has a large size of 4,524 million euros, and was listed on March 2012so it’s a fairly mature fund.

The replication method is physical and has no currency hedging.

The fund is domiciled in Ireland.

The dividend policy it’s at distributionand the coupons are distributed quarterly to investors.

The Fund invests primarily in securities included in the Index. These stocks include the top 500 companies in the US stock market.

Il Bottom it is proposed to hold all stocks in the Index with weightings very similar to those of that Index. The Fund will use a replication strategy to create a near mirror image of the Index. In limited circumstances the Fund may purchase securities not included in the Index.

The Fund may resort to the use of derivative financial instruments (ie, financial contracts whose prices depend on one or more underlying assets) for efficient portfolio management purposes.

Its benchmark

Il benchmark it is a parameter that is used as a reference by the fund manager in order to measure the risks and performance of the fund compared to a basket of similar assets that best represent the market in which it invests.

As we have seen, the reference benchmark for this ETF is l’S&P 500: this index tracks 500 large-cap US stocks.

The composition

As we have seen theinclude the S&P 500 index the 500 companies listed on the New York Stock Exchange with higher market capitalization.

Now let’s see in more detail how the composition of the ETF is, reporting the composition by sector with percentage weights:

• Informatica: 26,51%;
• Healthcare: 14.67%;
• Financial services: 11.73%;
• Cyclical consumer goods: 10.63%;
• Industry: 8.35%;
• Communication services: 7.83%;
• Consumer staples: 6.72%;
• Energy: 5.05%;
• Utilities: 2,93%;
• Materials: 2.80%;
• Real estate: 2.77%.

Among the top 10 positions we can include Apple, Microsoft, Amazon and Tesla.

Risk profile

The risk profile of this instrument is high: in fact we are talking about a degree of risk 6 are 7.

The main risk factors are:

• Concentration risk: if the Fund concentrates its investments in a certain way, the issues affecting the investments will have a greater effect than
  would happen if the Fund were more diversified. This concentration may also limit the Fund’s liquidity;
• Derivatives risk: this implies different risks and possibly greater than the risks associated with direct investment in securities;
• Index replication risk: the fund’s performance may not exactly track the performance of the index;
• Share Class Risk: as the share classes are not segregated, the transactions could give rise to liabilities for the other classes.

Costs

Now let’s see in detail the part of costswhich is one of the most important parts as it is precisely the costs that impact returns and therefore determine the “result” of your investment.

Neither are foreseen subscription fees and neither reimbursement costs.

The current expensesi.e. the annual management costs, amount to 0.09% per annum.

The performance fees they are absent.

Historical returns

Bearing in mind that the past performances however, they cannot tell us how much it will make in the future because past returns are not predictive of future ones, let’s see some data.

Over the years, i.e. since 2012, the fund has almost always equalized with the index, even if it has slightly outperformed during most years, by a few percentage points.

My Business Opinions

We are at the conclusions: Should I invest in the SPY ETF?

This ETF offers investors a efficient way to diversify your exposure to US stock marketbut without having to invest in more stocks.

The SPY fund is primarily aimed at investors who wish to include US stocks in their portfolio by taking on only one moderate level of risk, thus being able to count on an excellent sectoral exposure.

I advantages of this fund are undoubtedly the low management costs, the high and convenient portfolio diversification and the fairly strong security, since there are no great risks of bankruptcy for the issuing company, given that the fund is unrelated to it.

Lo downside greater instead is that relating to the fact of betting everything on a single country, and therefore of having little diversification.

The other risk it is obviously the one connected to the fluctuations of the American currency.

So I can’t tell you for sure if is it worth it or not invest in this fund, but I can tell you that it is undoubtedly a safe fund, and that if you place it in the light of a diversified portfolio and with a well-defined investment strategy then it could be a convenient investment for you.

Here you will find the best ETFs, if you are interested in learning more about them!

Before investing, educate yourself!

Before choosing the instrument to invest, you need a little training: it is essential to better define your investment strategy, focusing on your goals and your profile as an investor.

Without it, you go nowhere.

For this I have prepared some guides for you, to help you navigate this complex world that deserves preparation:

Finally, you also find some guide dedicated to those who need a refresher before starting to invest:

Enjoy the reading!