Last week, I explained why it‚??s important to have a working knowledge of the largest ETFs in the industry. This week, I’m fulfilling my¬†promise and starting in on those ETFs, beginning with SPDR S&P 500 ETF (SPY).
The S&P 500 is a well known stock market index that follows a changing selection of 500 companies, and SPY is the most-used method to track the S&P in your portfolio. The S&P had an excellent 2014, so this is a timely moment to discuss it.
Similarly to the index it tracks, SPY gained 11.29% last year. The U.S. stock market had an excellent year on the global stage, though it was not the world‚??s most profitable. SPY ‘s¬†$215 billion in assets under management is incredibly high, orders of magnitude more¬†than¬†even the second-largest ETF on the market. SPY weights its holdings approximately to the same degree they are used to calculate the S&P itself. Its expense ratio is 0.09%.
Some of the companies that compose the S&P pay dividends and, as such, SPY provides a dividend yield of 1.78%.¬†The below chart shows the path it took to that impressive gain in 2014.
SPY‚??s top 10 holdings comprise 17.43% of its assets, and all 10 are names known by the average investor. These holdings include Apple Inc. (AAPL), 3.54%; Exxon Mobil Corporation (XOM), 2.14%; Microsoft Corp. (MSFT), 2.09%; Johnson & Johnson (JNJ), 1.60%; and Berkshire Hathaway Class B shares (BRK-B), 1.49%.
SPY is an accessible way to get exposure to a selection of strong U.S. stocks, but don‚??t take my word for it — just look at how much capital other investors have poured into it. If you find this vote of confidence encouraging,¬†SPDR S&P 500 ETF (SPY) may be right for you.
If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my Successful ETF Investing newsletter. As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an e-mail. You just may see your question answered in a future ETF Talk.
In case you missed it, I encourage you to read my e-letter column from last week on Eagle Daily Investor about the top 20 biggest ETFs. I also invite you to comment in the space provided below my Eagle Daily Investor commentary.