Many investors know the SPY ETF as the index fund that tracks the S&P 500 stock market index. Because it’s made up of some of the biggest U.S. companies, it’s often used as shorthand for how the U.S. economy is performing as a whole.
However, there are some things investors might not know about this wildly popular ETF. Here’s a quick roundup.
It’s The Oldest ETF
The earliest history of the company traces back to in 1860 with Henry Varnum Poor’s publication of books that compiled financial and operational details on U.S. railroads and canals, for the benefit of potential investors. The “Standard” of Standard & Poor wouldn’t join until 81 years later when the company merged with Standard Statistics in 1941. However, the birth of the actual S&P 500 index doesn’t happen until 1957.
In 1993, the SPY ETF launched as the first-ever U.S.-listed ETF at the price of $43. That means, if you bought and held 100 shares back then, you would have made over $23,000 by now!
Not Necessarily The 500 Largest Market Cap Stocks
Many people think that the SPY ETF represents the 500 biggest (by market cap) stocks in the U.S. stock market. That’s not true. Actually, the S&P 500 is a hand-selected batch of stocks, determined by a 9-person committee, designed to represent the performance of a large cross-section of U.S. large-cap stocks.
Selection criteria for the stocks in the SPY ETF include a high market capitalization (over $6.1 billion), high trading volume, and the stock must be listed on the NYSE or NASDAQ.
The top sectors represented in the SPY ETF? Technology is by far the biggest, making up over a quarter of the index (25.28%), followed by Financials (16.55%) and Healthcare (14.31%).
The biggest holding is Microsoft (3.72%) followed closely by Apple (3.44%) and Amazon (2.93%).
There’s Not Always 500
Did you know that there are not actually 500 stocks in the S&P 500? The “500” figure refers to the number of companies, but some companies have more than one type of stock. For example, Alphabet has two stocks, GOOG and GOOGL. As a result, there can be more than 500 stocks in the SPY ETF. In fact, right now there are 506.
It’s The Most Popular ETF
Not only is the SPY ETF the oldest ETF, it’s also the most popular one. Right now its assets under management (AUM) total over $252 billion. Average daily trading volume is over $19 billion. Its popularity stems from the fact that it does a good job representing the U.S. economy as a whole due to its makeup of 500 committee-selected stocks for that purpose. Comparatively, the DOW, for example, only includes 30 stocks that are chosen by a formula.
As an added bonus, the SPY ETF is cheap to own. It only charges investors 0.09%, which is lower than most mutual funds.
The SPY ETF Has an Expiration Date
Did you know that the SPY ETF is technically set to expire in a century? It has an official expiration date of January 22, 2118 (or 20 years after the death of the last heir of its original Trust Agreement members). However, don’t get worried just yet. The date can be extended, and has already been extended once. When the SPY ETF first launched, it was set to expire after 25 years, which would have been January of 2018. In all likelihood, it will be extended again before time is up.